As a busy yoga teacher and/or studio owner it is tough to remember all of the things your tax preparer may need to do your taxes, but it is essential that you gather all of the necessary documentation to save both time and money. Here is a handy list to help you get started.
Your Yoga Business's Net Income
Give your tax preparer a Profit and Loss or Income Statement, showing your revenue or gross income for the year. A Profit and Loss Statement or Income Statement is a financial statement that summarizes the revenues, costs, and expenses incurred in 2017. For this statement, you will need information on all sources of income for your yoga business, including any 1099-MISC income from work as an independent contractor. You can deduct returns and credits that reduce your business income.
If you use your own vehicle for business purposes, you can claim a portion of the vehicles's operating expenses as a tax deduction against your business income. The IRS allows you to calculate this one of two ways:
The actual expenses method starts with adding up all of your vehicle operating expenses (i.e. loan interest, lease costs, gas, repairs and maintenance, insurance, etc.). Next, divide the miles driven for business by the total miles driven in the year, and apply the resulting percentage to the operating costs. This is your allowable deduction.
Under both methods, you are required to keep track of your business mileage in a vehicle log. Keep in mind that this can be as simple as documenting dates, descriptions, and miles in a notebook or spreadsheet.
You and your tax preparer may want to compare the standard deduction and actual expenses to see which gives you the biggest tax deduction.
Summary of Home-Office Expenses
If your home office is your sole place of business, or if you regularly instruct your students there, you can generally claim home-office expenses.These expenses include a percentage of your utilities, repairs and maintenance, home insurance, and mortgage interest or rent. You can calculate your home-office deduction by dividing the square footage of your office space by the livable square footage of your house, or by dividing the number of rooms your home office occupies by the total number of rooms in the house. Using either formula, multiply your total home expenses by the home-office percentage.
Some tax preparers will request all of your original receipts, while others will only want the summary; be sure to ask what your tax preparer expects you to provide and organize those documents. Just like the vehicle deductions, you can also use a simplified method to claim you home-office deduction. The simplified method allows you to deduct $5 per square foot of the portion of your home used for business.
List of Capital Asset Activity
A capital asset is property that is expected to generate value over a long period of time like buildings, computer equipment, machinery, and vehicles. If you bought, sold, or disposed of any capital assets in your yoga business during the year, you must account for it in your tax return. Prepare a list of all of your capital-asset activity for the year, and this will give your tax preparer enough detail to classify any changes. If your listing does not specify the exact nature of the assets being bought and sold, be sure to note that for your tax preparer.
Remember that tax time does not have to be stressful if you are organized and work with your tax preparer.