It’s tax season again, a stressful time for anyone who grapples with the complexities of filing a tax return. It can be hard to find an accountant familiar with the details of a Pilates career, so we put out the call for a CPA who’s worked in this area, and Michelle Fama, owner of Core Pilates NYC, connected us with her accountant, Steven Kingsley, CPA. He has worked with many a Pilates instructor over the years; in fact, he’s worked with the entire Core Pilates NYC staff. We put some of your top tax questions to him and he graciously provided answers. We hope this Q&A can be a helpful guide for any confused instructors out there, but be sure to consult a tax professional for help with your specific questions and concerns. Happy filing!
Pilates Pro: This is is the most-often-asked, big Kahuna question: What can I itemize for deduction?
Steve Kingsley: Let me start off by saying deductions are expenses incurred in order to provide one’s expertise, service or to operate that particular business activity. There are expenses that are general to most any independent contractor but in some cases I have tried to put an explanation to how they apply to Pilates instructors. These would include the following:
- Business telephone (excluding home phone)
- Internet access used for research or booking appointments (lots of Pilates studios have online booking for their clients and instructors need to check in periodically)
- Professional trade publications and magazines
- Professional organization dues and memberships
- Office supplies, postage and stationery
- Computer expenses, including the cost of new equipment
- Professional seminars and education: For someone who is just getting started in Pilates as a profession, the cost of teacher training is NOT deductible. Classes required to start a new career are not deductible. However, the cost of maintaining and adding on additional certifications is deductible. Seminars and education are limited to one’s specific profession.
- Business gifts to clients or colleagues: These are limited to $25 per person per year.
- Out of town travel expenses: A lot of instructors have the opportunity to go to conferences and retreats. These are 100 percent deductible. This category would include airfare, hotel, ground transportation and rental car but not the cost of the conference, which would be included under the category above.
- Local transportation: The cost of going from home to the pilates studio or studios you provide services for are deductible as well as the cost of going between studios.
- Meals and entertainment: The cost of taking a client or colleague out is deductible. However, it is limited to 50 percent of the total cost.
- Liability Insurance: Many independent Pilates instructors are required to have their own insurance.
- Health insurance
- Research and reference: This includes going to other Pilates and exercise classes to learn and experience how others teach
- Workout clothing used during teaching or to take other classes
PP: Can I deduct my gym membership or other exercise classes?
SK: Gym membership is specifically NOT deductible, because it’s considered a personal expense. But exercise classes that you enroll in can be deducted as research (see above). Gym membership can be deducted as part of a weight-loss program if under a doctor’s order as a medical expense. But this does not apply to people in fitness as a business expense.
PP: How can/should I organize my quarterly taxes?
SK: When you file your tax return, your accountant should prepare estimated quarterly taxes for the next year. The estimates are figured based on using 100 percent of the tax liability from the year before. Paying estimated taxes avoids underestimated-tax penalties and helps pay towards your current year’s liability. I like to do tax planning for my clients prior to the end of year to find ways not only to help lower their tax liability but also to see where they stand in the current year.
PP: Are there any deductions that tend to raise red flags for Pilates instructors?
SK: Taking liberties and reporting deductions excessively will always create an audit. The general rule of thumb in a service business is that your expenses shouldn’t exceed more than 30 to 40 percent of your income. The best way to be prepared for an audit is to have all your documentation in order. Each taxpayer should keep all their receipts and should label the business purpose of each expense.The IRS only requires a receipt if it is over $75. And remember to ALWAYS report all of your income, regardless of whether you receive a 1099.
Steven Kingsley has been a CPA for 25 years, and has been running his own practice for 16 years. He works with a lot of creative clients in the film, music, fashion, fitness and restaurant industries. He can be reached at firstname.lastname@example.org.
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