The clock is ticking on filing your business income taxes for 2013. Have you taken all of the deductions you are entitled to?
Let me preface this article by saying that I am not an accountant! But since there is no escaping the oncoming April 15 deadline, if you have not already filed your returns for 2013, time is a-wasting. How, when and how much tax you pay will be somewhat dependent on your business type; LLC vs S-Corp, etc. Hopefully, no matter your business type, you were able to show a profit last year, along with a salary for yourself. Remember, getting paid for running your business is only fair; someone else would get paid to run it if you weren’t. Many salon owners take a regular salary equal to approximately 4-6% of revenues. How you collect that money will depend, again, on the advice of your accounting professional; whether you take a paycheck every two weeks with the rest of your staff, or in one lump sum at the end of the year. Or perhaps you take a smaller salary and a portion of profits at the end of the year, putting any additional profits back into the business.
One advantage of owning a salon is the ability to write-off of legitimate business expenses. These might include employee team building events, education outings, phone expenses, publication subscriptions or a marketing course. Make sure you’ve collected and itemized all of your receipts to make determination of these deductions quick and easy.
Many salons are besieged with requests for charitable donations for fundraising events, soccer teams, and other causes your clients support. It’s impossible to say no to everyone, and without a proper salon management system it can be very difficult to track donations. For example, with SalonBooker you can create a special code for when these gifts are redeemed that will allow you to track them at the end of the year by running the Special Code Usage report. However, not all of these good deeds qualify for tax relief. For more information read salon tax professional Larry Kopsa’s blog on the Modern Salon site regarding deductions for donations and charity work.
The prevalence of gratuities in the salon industry remains one of the biggest issues related to taxes. Many salon owners are unaware of their obligation to ensure that staff members who receive tips are reporting them on a monthly basis. The salon is also responsible for paying FICA on the gratuities, as well as withholding the appropriate amount for the employee’s share of taxes. Throughout the year, be sure to use the Daily Tips Reports, which can be run for a specific time period, and use the Tracking Tips function in SalonBooker to help create reliable records, and make tax filing easier for both you and your staff. More detailed information on gratuity taxes can be found on the IRS site here.
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