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Running a home-based microgym is more than just finding new customers and creating an awesome workout space. Keeping track of business financials and properly filing required forms during tax season also needs the proper attention. Luckily, you don’t have to go through this process alone. There are numerous accountants out there willing to handle a majority of the work and guide you on all the necessary steps. Understanding eligible business deduction, staying on top of bookkeeping, meeting deadlines and planning for taxes can help you successfully navigate tax season as a home gym owner.
One of the top benefits of opening your own microgym are the business deductions you now become eligible to take. According to the IRS, to be a qualifying business expense, the expense must be ordinary and necessary. This means that it must relate to running your home gym. For example, new furniture for your house would not be a qualifying expense, but a new chair for your home gym would. The IRS is very strict when it comes to small businesses, especially those that report income and expenses on a Schedule C. If the IRS does select you for an audit and they find ineligible expenses, you could face stiff fines and penalties, so don’t push the limits!
There are some qualifying business expenses for microgyms to be on the lookout for. New equipment, a business laptop, software purchases, bank fees, cleaning supplies and repairs are all common expenses for home gyms. There are some gray areas when it comes to business deductions. For example, repaving your driveway so customers can have easier access is both a personal and business expense. Because of this, an allocation would be needed based on personal and business use. The IRS has tons of articles on qualifying deductions. Moreover, an occupation as a microgym owner can lead to a home office deduction and the qualified business deduction. For more information on these two, visit our blog post.
Understanding what a qualifying expense is remains the first step when it comes to tax season. Good bookkeeping procedures need to be implemented throughout the year to properly keep track of expenses. The first tip when it comes to bookkeeping is to invest in a software.
GORX Fitness is releasing an app that will help you keep track of income, and other software programs, like QuickBooks, can integrate with your business bank account to import all purchases, making tax season a breeze. Furthermore, bookkeeping should be done on a monthly basis, especially the bank reconciliations, to catch any mistakes and stay on top of cash flow management. Pro tip: Receipts should be kept for 3 years in case of an IRS audit and to back up any business expenses.
On the topic of bookkeeping, if you're like most people, you dread spending hours upon hours entering numbers and data into a spreadsheet. Listen, we get it. Not everyone is a bookkeeping wizard. This is where services like Fiverr can come in handy. You can find a 5-Star Bookkeeper to reconcile 200 transactions for as little as $25. Twenty-five dollars for someone to save us the headache of doing it ourselves sounds like a bargain to us!
As a small business owner, you have multiple deadlines that you need to keep track of. If you have any employees or hire contractors, you need to file 1099s and W-2s by January 31. If your business is set up as a Sole Proprietorship or Single Member LLC, you will file your taxes on your individual return, which is due April 15, unless an extension is filed. Our blog post on forming a home gym can help you differentiate between the two.
If you run your home gym as a S Corporation, C Corporation or Partnership, you will need to file a separate business return by March 15. Additionally, depending on your income levels from your occupation, estimated payments may be needed throughout the year. Strong bookkeeping procedures can help you meet all these deadlines to avoid fines and penalties.
Tax time can be stressful, which is why everything should not be put off until the last minute. Monitoring your income and expenses throughout the year aids in tax planning strategies. The first tax planning strategy is to take advantage of Section 179 depreciation, which allows you to write off the entire cost of an asset in the year it is placed in service. This can greatly reduce your taxable income. You will also need to analyze current and future year tax rates to determine whether you should speed up receiving income or wait to purchase equipment. Hiring an accountant can be very beneficial for navigating tax season and to suggest tax planning strategies tailored to you.
Tax season can seem overwhelming as a small business, but luckily there are plenty of resources and professionals out there willing to help. Once you are in contact with an accountant, reach out and ask them what they need from you. Most will just require a copy of your financials or backup of your software program to get started, but each firm is different. Some final words: invest in an software like QuickBooks and hire a qualified accountant to help your business stay in tip top shape as tax season rolls around.
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