Whether you own a massage therapy practice or work independently as a massage therapist, there are a few things you need to know for tax season—including documents, records of expenses, and COVID-19-related information.
Gather Necessary Documents
The first thing you’ll need to do is gather the necessary documents and forms, and fill them out correctly. The forms you fill out will depend on your status as an individual—do you own a practice, work for someone else, or work independently?
Take a look at the list below to see what applies to you.
1040 Form
The 1040 form is a U.S. individual income tax return, meaning you work for yourself. On this form, you will report your income and your deductions. This form helps you know the amount of tax you owe, and the refund you can expect to receive.
In addition to the standard 1040 form, there are three different forms, also referred to as schedules, you can fill out to make sure the IRS has all the needed information from you.
View each schedule description below:
- Schedule 1 is needed if you have additional income like unemployment compensation, prize or award money, and any deductions to claim like a student loan interest deduction.
- Schedule 2 is for those who owe other taxes, such as self-employment tax, etc.
- Schedule 3 is a form to claim any credit that you didn’t claim on the 1040 form, such as education credits or foreign tax credit.
Learn more about Form 1040.
Schedule C
If you work as an independent massage therapist, you will need to fill out a Schedule C form. Schedule C is a part of Form 1040 and is used by sole proprietors. The information you fill out on Schedule C helps the IRS to calculate how much taxable profit you made.
The information from your business records will be helpful when filling out Schedule
Learn more about Schedule C on Form 1040.
Both forms, Form 1040 and Schedule C, will need to be sent to the IRS either electronically or by mail.
1099-MISC
A 1099 tax form is required for anyone that is self-employed. This form is also for a business owner to give to each person to whom they have paid during the year, i.e. each employee at a massage therapy practice must fill one out.
All business expenses, whether you own a practice or work independently, will need to be recorded on this form. This will show the IRS the total amount of expenses that can be deducted from your income.
Keep in mind that the IRS considers you to be the employer and the employee of your business, so this means that you must pay both the employee and the employer share of the Medicare and Social Security taxes, which are known as the self-employment tax.
Learn more about the details of the 1099-MISC form.
W-2 Form
Any employee who has income, social security, or Medicare tax withheld from their checks will need to complete a W-2 form and send it to the IRS. Every employer who has earned more than $600 in one calendar year from services performed by an employee must fill out a W-2 for each employee.
Learn more about the W-2 form.
Record All Business Expenses
Throughout the year, you will need to make sure you record all of your business expenses. In order for an expense to be deductible, it must be considered both necessary and ordinary.
This can include:
- the equipment you purchase for your practice
- massage therapy insurance
- association fees
- rent
- and more
These expenses will be recorded on Form 1040. Keep in mind that most business-related expenses are tax deductible, so you will want to keep a meticulous record of your expenses.
Turbo Tax has collected a list of 9 things most people don’t know are tax deductions.
You can also take a look at the IRS website to see what exactly qualifies as a taxable expense for your business.
Keeps Records of Business Transactions
You must keep a record of your business transactions going back at least three years. If the IRS ever reaches out to audit you or your business, this step is essential. This step will also simplify things when it comes time to calculate your business expenses.
COVID-19 Relief Options
You may be wondering about any COVID-19 relief options, especially if your company has been negatively impacted by the pandemic. You should note, however, that the Paycheck Protection Program (PPP) ended last year on May 31, 2021. Note that existing borrowers may be eligible for PPP loan forgiveness.
Although the IRS is no longer able to accept new applications for COVID-19 relief loans and grants, you are still able to apply for PPP loan forgiveness and EIDL increases. You can take a look at this page to learn more.
Other Tax Season Tips
If you are still unsure of which form(s) to fill out, be sure to take a look at the Self-Employed Individuals Tax Center.
Final Thoughts
We hope this information is helpful to you in understanding what you need for tax preparation this year. Don’t procrastinate getting your taxes done. Remember that at Beauty and Bodywork Insurance, we are the insurance experts, not the tax experts, so if you have any questions, contact an accountant, a tax specialist, or an attorney. We wish you the best of luck with your massage therapy business and with your tax season preparation!
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