By Mike Jesowshek, SUCCEED! Speaker
Before you know it, your doors will be blowing off with the New Year’s resolution folks. However, if you took December easy with paperwork, you’ll be spending January in your office doing bookkeeping, W2s and 1099s.
It does not need to be that way!
Here are four things you can do NOW to prepare for the New Year, so when the flood of new members comes, you can spend your time doing what you do best: getting clients fit. Do your best to implement these strategies before year-end so you can grow your business for the entire year!
Four Tax Items to Know Leading Up to the New Year
1. W2 and 1099 — Due January 31st
- W2: A W2 reports the employee’s annual wages and amount of taxes that were withheld from their paychecks throughout the year. Your payroll provider should be helping with this area. Reach out to them to see if anything is needed before year-end.
- 1099: These are for individuals, companies and/or contractors that you paid more than $600 to throughout the year. Collect a W9 from the vendor and the information from that will help complete the 1099. Any payments made via credit/debit card or PayPal do not need a 1099.
2. Complete Your Bookkeeping
The last thing you want to be doing during the January membership rush is figuring out what expenses you had back in June. Take time now, before December 31, to complete your bookkeeping and make sure everything is caught up and ready for taxes.
The easiest way to do this is to utilize software that can connect directly to your bank and allow you to upload transactions to it. We recommend using software called Xero for your bookkeeping needs. It is very intuitive and easy to understand. Regardless of which software or method you use, get it done now so you have nothing to worry about in January!
3. Look Into Last Minute Tax Planning
If you put in the time now, you will thank yourself in January.
Late is better than never. You still have time to implement some last-minute tax planning strategies. Here are some ideas:
- Expense Acceleration (Cash Basis Filers): Increasing your business expenses by purchasing items or prepaying normal operating costs can be a huge tax help. These can be simple expenses like paper or office supplies to more complex items like equipment or advertising. Make these purchases now to ensure you can write-off major business investments—such as your SUCCEED! conference registration and travel receipts—as soon as possible.
- Income Deferment (Cash Basis Filers): You can reduce your income by asking customers to wait on paying you until next year. The income then becomes taxable in the next year rather than this year.
- Charity: Charitable donations can be cash, real estate, motor vehicles, clothing, equipment, etc. Donations made to qualifying organizations can help you limit your tax liability but must be completed before year-end. The tax deduction is limited to those that itemize.
Note: As with all tax strategies, do not just implement them for the tax savings if it will hurt your business. The health of your business is your first priority; these strategies may be used to assist that.
4. S-Corporation Salary
If you operate as an S Corporation, you know that you must pay yourself, as the owner, a reasonable salary. This salary must be completed before year-end. If you operate as an S-Corp be sure to have this payroll processed. If you have been running payroll all year, take a second to review the salary amount to ensure it is still reasonable; make any adjustments if necessary
If you have self-employed health insurance and operate as an S-Corp, you will need to include these payments on your payroll. Be sure to contact your payroll provider before year-end with this number so you can ensure an accurate W2.
If you are not currently operating as an S-Corporation, reach out to your tax professional to see if these may be a good option for you.
Ringing in the New Year Worry-Free
I know the last thing you want to do is bookkeeping and tax-related work right before the new year. However, if you put in the time now, you will thank yourself in January when your business needs you most out on the gym floor. Don’t spend January in your office when you can take the time now!
As always if you are looking for more information or want someone to handle these tedious but necessary tasks do not hesitate to reach out, I would be more than happy to chat!
Want to discover more tax tips that can save your fitness business thousands of dollars? Join Mike Jesowshek in his session at SUCCEED! AFS' Annual Business Convention and Expo (April 12-14, 2019 in Irvine, CA). Mike's session is called:
Accounting and Tax Essentials to Save Fitness Studios Thousands
Mike Jesowshek, CPA is the founder of the accounting firm JETRO and Associates. He has a strong passion for both fitness professionals and technology. He helps provide a digital accounting, bookkeeping, and tax solution for studio and gym owners who are looking to take it to the next level by utilizing modern, cutting edge technology.