Have you done your taxes yet? If you’re a health coach who does business as a sole proprietor or LLC, the deadline for submitting your 2018 tax return is Monday, April 15, 2019, which you probably already knew. But do know what you need to file them?
In today’s checklist, you’ll find everything from deductions and day-to-day expenses to IRA-SEPs. It’s not a totally comprehensive list (you obviously need your social security number or tax ID number and things like bank account interest), but it could mean the difference between getting a refund and owing the IRS. Keep in mind, I’m a writer, a nutrition coach and a self-employed entrepreneur—I’m not a tax professional or CPA. So if you have any questions, be sure to consult an expert in your state.
Tax-Prep Checklist:
- Year-end statements to show your income
- A record of business expenses for the year
- Size of your home work space (if applicable) and any home improvements
- What you paid in city and state taxes
- What you paid in estimated quarterly taxes
- Mode of transportation for your business
- Continuing education costs
- Day-to-day expenses
- Retirement fund contributions
If you’ve scanned the checklist and you’re ready to meet with your tax professional or do your taxes on your own, good luck! But if you want more details about each item, keep reading.
1. Year-End Statements to Show Your Income
Health coaches who are employed by a company get a W-2 stating their income from the previous year. However, for those of us who are self-employed and use payment systems like Square or Stripe for transactions, you’ll need to pull up a form called a 1099-K, which summarizes the sales activity of your account. To find this form, head to the dashboard of whichever platform you use.
2. A Record of Business Expenses for the Year
You’d be surprised at all the things you can deduct when you own a business, I know I was. Think about what you’ve bought to run your health coaching practice. I’m talking about liability insurance, printer paper and ink, giveaways on your social media page, hiring a web designer, cell phone and internet costs, kettlebells or other fitness equipment, and your tax prep fees from last year…to name a few. They’re all deductible, just make sure you keep your receipts.
3. Size of Your Home Work Space and Home Improvements
Do you work out of your house? It doesn’t matter if your home office is a whole room or a table in the corner of the kitchen, you can usually claim it as a deduction. You can also claim a percentage of your home’s expenses like electricity, garbage, house cleaning services, and any updates or improvements you make. Be sure you know the square footage of your home as well as the square footage of the space you work out of.
4. The Amount You Paid in City and State Taxes
When you start your health coaching practice, you’re required to get a state and city business license. And every quarter, they’ll come looking for their portion of your earned income. This can be used as an expense for your business too, so keep track of what you paid in 2018. If you’re panicking right now because you haven’t paid your city and/or state taxes, don’t worry. Just contact your local Department of Revenue and see how you can pay up; you’ll likely just have a late fee and some interest.
5. The Amount of Estimated Federal Taxes
Did you know that you’re supposed to pay estimated federal taxes every quarter? If not, you might have an unwelcome wake-up call this April. To quote what’s stated on the IRS’ website, “Taxes must be paid as you earn or receive income during the year. If you are in business for yourself, you generally need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax. If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty.” I found this out the hard way one year, when I didn’t pay attention to how much I was earning and ended up with a $21k tax bill. You can use this form to calculate your estimated quarterly taxes, which are due April 15, June 15, September 15 and January 15.
6. Mode of Transportation for Your Business
When you travel to see clients, do you take a bus? A car? An ElliptiGO? If you take public transportation, your bus fare may be deductible. If you’re driving, track your mileage using an app like MileIQ, and know that interest on your auto (or ElliptiGO) loan, parking and tolls, new tires and maintenance are likely deductible as well.
7. Continuing Education Costs
Some health coaches, nutritional therapy practitioners, and personal trainers need to earn CEUs in order to keep their certification in good standing. When you work for yourself, you can deduct the cost of those classes, whether you’re learning about endurance training, bio-individual nutrition, or ancestral movement techniques. Keep track of these costs—they can help bring down your tax bill.
8. Day-To-Day Expenses
Everything from brunches to books can be deducted come tax time. Say you’re meeting a new client or discussing your brand refresh with your web designer over paleo pancakes. As long as you’re talking about your health coaching business, there’s a solid chance it’s a deduction. Same thing goes if you buy Mark Sisson’s new Keto Reset Cookbook or Robb Wolf’s Wired to Eat. As long as you don’t abuse the benefit, you should be good-to-go on anything that’s considered an expense for your business.
9. Retirement Fund Contributions
I’ve been self-employed for almost 15 years, and while I’d love to have someone match my retirement contributions like a lot of companies do, an IRA-SEP (also called a Simplified Employee Pension Individual Retirement Arrangement) is a great way to save and get a significant tax break compared to a traditional IRA. You can contribute up to 20% of the net amount of your earnings and essentially lower your taxable income for the year. I call that a win-win.
Summary
Tax time is right around the corner, but with this checklist, you should have a good handle on what you need as a health coach doing business as a sole proprietor or LLC. Remember, you can always file an extension if you need more time, which gives you until October 15. Just know that if you owe anything, you’ll be paying six months worth of interest.
Still a little lost? Hire a tax expert in your area who specializes in small businesses. Or better yet, hire someone who specializes in taxes for the health and wellness industry.
Good luck!
