Usually hell bent on learning new techniques to share in her salon with her guests and stylists she mentors, this year at the ISSE hair show she was thrilled to see a class geared towards TAX for the Salon industry! The subject she feels is a mystical mystery that her bookkeeper/accountant figures out at the end of the year.
“I never really know if everything I am doing is right or if I could be saving more money as the check I write every year progressively gets larger. I would personally like to be keeping my money”.-Carleen Sanchez
‘Kopsa otte CPA taught the class that opened my eyes to some very important ways of thinking about my small business. His blog\newsletter and archives are AMAZING and I think you should subscribe to it. I am very seriously considering changing to his company to do my taxes and help me with tax planning. He really specializes in salon tax.’
We asked Carleen to share her takeaways.
YOU CAN NOT WAIT TILL THE END OF THE YEAR TO SAVE, YOU HAVE TO PREP TO SAVE.
Meaning I need to think about what I am purchasing and how that may be a tax write off for my business and I should document it. I should not just give a big box of random papers and receipts to my lady and expect her to know what was a business expense. She most likely will only do the obvious deductions and many thousands of dollars could be slipping through my greedy fingers.
Example: Purchasing art for my salon puts me in a situation where I am driving to the coast to buy art from a certain artist. I should be documenting the trip mileage (57 cents a mile) the cost of the art and money I spent on lodging and food could be a write off. Then when I am changing the art around in my salon I will need to store this art and the best place to store it is in my house making a portion of my house a write off or a storage facility’s fees.
This is a very creative way of thinking about taxes. Having a piece of paper with the date with what you did and how much you spent in a binder is great for if an audit happens so you have proof. The IRS would then have to say your a liar. If you have written proof most agents are going to be happy you have documentation that back up your numbers and move on to the guy that has no documentation.
I also thought I needed every receipt for every meal or taxi. Apparently I only need to save receipts for meals or rides costing MORE than 75$. I can just write the date and the charge on a piece of paper and snippet of what business was talked about and that serves as proof. Start a log of what you are buying and for what purpose and you will probably immediately start saving money.
TIPS ARE TAXABLE
An honest way of reporting them is on your profit or loss schedule C the paper you turn in for taxes put your main amount of income in the column marked “GROSS” income and put your calculation on your tips in the column that says “OTHER” income and make sure you write on the OTHER line “TIPS.” This will help the IRS to realize you are doing things the way they want by reporting your tips. Helps you look like the honest engine that you are.
HOME OFFICE IS A TAX WRITE OFF AND NOT A MAGICAL UNICORN
Follow the IRS rules that recently changed for our benefit and see some huge tax savings. You should be writing off a portion of your utility bills/cleaning lady/mortgage or rent etc.
DAMAGED CLOTHING IS A DEDUCTION
When documenting the damaged clothes look online for what the depreciated value is on the IRS website (example a dress $3-$17) if your damaged clothing is more than $500 you may fill out form 8383 to attach to your tax return. TAKE A PICTURE OF THE CLOTHES YOU ARE CLAIMING (back to that documenting thing again.) I still keep black sharpies with me to “fix” my oops chemical spots but at least now I can think about wearing some color in my wardrobe and not feel as bad if it gets damaged.
If you have any great phone apps that help with this documentation and tax subject please share with me @ firstname.lastname@example.org and always ask your tax professional about your deductions and your business model as I am just sharing some tidbits I learned.
side note.. I think it would be really fantastic if this Kopse Otte company held a webinar with PBA(Professional Beauty Association).
Carleen Sanchez is a curly hair specialist and also has some great tip for “curly girls” on her blog!
(The above are Carleen Sanchez’s notes from the class she took on taxes at ISSE 2015. She is not a tax professional or licensed to give tax advice. Please see your accountant when making financial decisions. The above is intended as information for information purposes only.)