Tax season can feel extremely overwhelming, especially if you wait until the deadline to get organized. As a fitness business owner, you have so many priorities at the start of the new year which means preparing taxes might be at the very bottom of that want-to-do list. Often times business owners will wait until crunch time to get all their tax documents in order or to hire professional accounting resources. Delaying the tax process only leads to feeling rushed and stressed, which can leave more room for error.
Here are the top preventable mistakes fitness professionals make during tax season.
Mistake: Waiting until the last minute at the tax deadline
Instead of waiting to submit your taxes the month-of, take strategic steps that will help you lower your tax liability and prepare you for the upcoming season. When you prepare in advance you can speed through your taxes and continue focusing on your business.
Mistake: Not knowing when to file
Your tax requirements depend on the legal structure of your fitness business, so whether you operate as an LLC, S Corporation or C Corporation, your filing requirements will vary. Take the time to understand what your business is required to file and how often, because it might be quarterly instead of annually. Understanding the timelines and frequency will help you avoid penalties and interest.
Mistake: Treating tax season as a once-a-year event instead of an ongoing process
Having a proactive mindset will always pay off when it comes to filing your business taxes. When you treat your taxes as a year-long project instead of waiting until the last minute, you will alleviate stress and room for error. You might want to consider creating an annual tax strategy with milestones that set you up for success. Every fitness business investment, purchase and sale should be recorded in real-time as you build and grow your business. When you record all of your expenses and revenue in detail you will have all the data needed when it comes to meeting tax deadlines.
Mistake: Skipping out on accounting software
One of the biggest mistakes most small business owners make is not taking the time to put an accounting system in place to help them manage and automate their cash flow. When you invest in small business accounting software you have a source of truth for all your annual tax data. When everything is in one place and extremely accessible, it makes your tax filing process so much easier and more organized.
Mistake: Throwing away financial documentation
As you do business, make sure you are recording all paper trails such as invoices, bills and transfers so nothing falls through the cracks. You can document records in your accounting software for organization, and also keep hard copy documents in a folder or file for records. You never know when you might need to retrace financial data for tax purposes, and it’s better to be safe than sorry.
Mistake: Not considering an experienced accountant to support you through the tax process
Hiring an experienced small business accountant is a great investment and will take a lot of the heavy lifting off your plate. While it’s not always the right route, it’s prudent to consider outside help. When you are searching for a tax professional, make sure you look for someone who has proved successful with businesses of similar sizes in your industry. Business tax filing is fairly complex and there are so many different elements to work through depending on size and type of business, so it’s important to hire someone who knows your industry and space well.
Mistake: Not knowing the small business tax deductibles
Ensuring you are maximizing every possible tax deduction is crucial to help you keep as much money as legally possible. There are many small business deductibles that you should become familiar with, and then you can start logging these deductibles throughout the year. Some fitness business deductible examples include the workout equipment purchased for your clients, music streaming services for workout classes, subscriptions to professional fitness journals and business education. Professional service investments such as bookkeepers and accountants are also tax-deductible, so even more reason to invest in these resources that will help you maximize your deductions.
Mistake: Mixing business and personal
When you run your own business it’s easy to accidentally mix personal expenses with your business expenses. Make sure you keep expenses and revenue for yourself and your business completely separate. Many tax professionals recommend having separate checking and credit card accounts for personal and business so that there will be no overlap nor confusion.
Mistake: Not keeping proper payroll records
Make sure you are keeping proper payroll records for all of your hired employees and contractors. You should spend time organizing your payroll records and ensure you classify each employee correctly. It will save you time in the long run and make preparing for tax time a lot easier.
When you own your own fitness business, tax season can often feel like a dreadful and time-consuming time of year. However, if you treat business taxes as an ongoing annual project and invest in the right tools and professionals to help you, tax season will become more of a breeze. Are there other duties you can consider delegating or getting support with? Read ‘6 Tasks to Consider Delegating as a Fitness Business Owner.’