Issue link: https://www.massageandbodyworkdigital.com/i/72121
end of the year, I remove all the file folders and store them in a labeled cardboard file box. Nice and neat, and once you set it up, it requires no maintenance other than changing the folders out every year. If you tend to casually throw receipts in a box or a drawer, just remember that if you're ever audited and asked to produce the receipt for the ink cartridges you purchased or the association dues you paid, you could spend days looking for them. Save yourself the trouble and set up a system that makes sense to you. The length of time the IRS requires you to keep tax records depends on the situation. In most circumstances, three years is acceptable. However, if you somehow failed to report income you should have reported, you better have those records dating back six years. If you've ever been deemed guilty of failing to file or filing a fraudulent return, you must keep records indefinitely. If you're depreciating equipment or amortizing property, you should keep them until the period of limitations pertaining to the depreciation or amortization expires. If you claim a business loss due to a bad debt, you should keep records for six years. If you have employees, you must keep employee payment and tax records for a period of four years. Keep your records in a safe place. An off-site storage business will store paper records in fireproof, climate-controlled security at a cost as low as $10 per year for a regular-sized file box. If you keep electronic records on a flash drive or external hard drive, invest in a fireproof file cabinet or fireproof lockbox for safekeeping. BE PREPARED When you're an entrepreneur or an independent contractor, it's easy to let taxes slip your mind. You don't see them coming out of your paycheck every week or month. And that's just the challenge: they're not being deducted. It's up to you to pay that tax. You have to remember that all that money isn't yours; part of it belongs to the IRS. Get in the habit, each time you get paid, of setting aside the money to pay your taxes. If you deposit it in a savings account, it will draw a little interest until it's time for you to pay. The tax bracket you're in depends on how much money you make and your filing status, whether that's single, married filing jointly, or head of household. Tax brackets vary from 10 percent for a person making up to $12,250 if filing as head of household, to 39.5 percent for a head of household making in excess of $383,350. Most massage therapists are going to be in the range of 15–28 percent, depending on filing status. Personally, I don't mind owing just a little in taxes at the end of the year. I don't like loaning the government my money interest-free, so I don't want to overpay. Putting aside 20–25 percent to pay taxes is probably a safe move for most of us. When it's time to file, dig out those deductions, and hopefully they'll bring your tax bill down substantially. Remember: it's not illegal to avoid; it's just illegal to evade. Note 1. Gregory v. Helvering, 293 U.S. 465 (1935). Laura Allen is the author of A Massage Therapist's Guide to Business (Lippincott Williams & Wilkins, 2011), Plain & Simple Guide to Therapeutic Massage and Bodywork Examinations (Lippincott Williams & Wilkins, 2009), and One Year to a Successful Massage Therapy Practice (Lippincott Williams & Wilkins, 2008). Allen is the owner of THERA-SSAGE, a continuing education facility and alternative wellness clinic of more than a dozen practitioners. H&R Block offers ABMP members special savings and discounts on tax preparation when they visit an H&R Block office. To find every deduction and for more information, visit hrblock.com/offers/ abmp. Download a coupon today.