Massage & Bodywork

March/April 2010

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WIN THE TAX GAME There are many negative perceptions about paying taxes. Old sayings like "born free, taxed to death" are the norm, and a lot of people look at the Internal Revenue Service and the state revenue department with anger, dread, or fear. But taxes are a necessary evil. The government couldn't run without them; the infrastructure and the very fabric of our country are dependent on them. It's illegal to evade paying income tax, but it's perfectly legal to avoid paying taxes by taking advantage of as many allowable deductions as possible. You don't have to be an accountant in order to navigate the tax waters, but if you're seriously mathematically challenged, or lack enough discipline to take care of documentation and keeping up with the due dates, you may want to hire one. When it comes to your money, you don't want to be in denial about where your talents lie. If you feel you're not financially savvy enough to maximize your income while minimizing your tax liability, it will be well worth it to you to pay a competent financial advisor or tax professional to help. DIFFERENT STROKES FOR DIFFERENT FOLKS Different tax rules apply to different situations. Employees, employers, and independent contractors all have unique tax obligations and deductions. AN EMPLOYEE An employee should fill out a W-4, the Employee's Withholding Allowance Certificate, as soon as you're hired for the job. Your employer will deduct taxes from each paycheck; by February 2, your employer must provide you with a W-2, a Wage and Tax Statement, that shows how much you've earned and the amount of taxes that have been withheld from your earnings during the previous year. Employees aren't eligible for as many tax deductions as self-employed therapists, but don't overlook the ones you're still entitled to, including: • Continuing education expenses. • Home office expenses. • Job-hunting expenses. • Liability insurance, if your employer requires you to provide your own. • Massage-related books and magazine subscriptions. • Professional association dues. • Travel expenses to attend continuing education and professional association meetings. • Travel expenses for doing outcalls, if your employer does not reimburse you. • Tax advice and preparation expenses. • Work clothes and uniforms, if you're required to provide your own. Most miscellaneous tax deductions for employees are subject to the IRS' "2 percent rule," which means you can deduct the amount that's left over after you subtract 2 percent of your adjusted gross income from the total of the deductions. Don't forget that if your employer covers any of those expenses for you—such as paying for you to attend a seminar—you cannot deduct the expenses, too. THE INDEPENDENT CONTRACTOR An independent contractor should fill out a Form W-9, Request for Taxpayer Identification Number and Certification. For all intents and tax purposes, an independent contractor is a self-employed person, and as such is entitled to the above tax deductions, as well as others. In addition to the tax deductions mentioned earlier, independent contractors can deduct the cost of printing and reproduction for business cards; any advertising they do on their own behalf; the cost of a cell phone if they work on an on-call basis and use it for business purposes (or a percentage of the cost, if used for personal as well as business use); legal fees related to your job; tools and supplies needed for your job; and travel, lodging, meals, and entertainment, if related to your job, among other things. Tax deductions and income received should be reported on Schedule C, Profit or Loss from a Business. Independent contractors must pay self-employment tax, which is due every quarter, and is also known as quarterly estimated tax. Filing dates for quarterly estimated taxes are due April 15, June 15, September 15, and January 15 for the final payment of the preceding year. connect with your colleagues on massageprofessionals.com 21

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