Health club owners are notoriously busy people. If you’re one of them, you are likely splitting your time among a range of tasks, such as marketing your business, courting new clients and working as a personal trainer—not to mention keeping your books current and seeking the best ways to grow your business.
As we get closer to yet another year’s end, there are many steps health club owners can take to potentially reduce their tax liabilities and avoid any issues with the IRS.
1. Work with a skilled tax consultant.
Few health club owners are also tax law experts. You can do plenty of research on your own, but most small business owners find they simply do not have the time to commit to the comprehensive research that ensures they’re saving the most money possible.
Thus, working with a skilled and experienced tax professional will help make sure you do not overpay on your taxes. It also saves you time and energy that are better spent running your club and serving your clients.
2. Use deductions whenever available.
Club owners are often surprised about how many tax deductions are available to them. By using these deductions, you can subtract some business costs from your gross income, reducing the amount of money the government can tax. For example, let’s say you purchased new exercise equipment for your club this year. Those purchases are, in fact, tax deductible. The same is true for office supplies you purchase or any expenses you incurred when traveling to conferences for work. Again, an experienced tax professional can give you a full list of the deductions available to you so that you can take full advantage of their benefits.
3. Ask for filing extensions when necessary.
You might not know it, but you actually have some level of control over your tax due date if you ask for an extension. This can help you better organize all of your paperwork and gather necessary items that can lower your tax liability.
4. Delay or accelerate wisely.
At the end of the year, delaying or accelerating certain actions can be beneficial when tax season comes. For example, you might want to delay collecting payments or selling assets until the new year. You could also consider accelerating expensive purchases of fitness or office equipment to take advantage of the expense in the current year.
5. Properly classify your business.
The correct classification of your business can give you a lower tax rate. Examples of business entities include sole proprietorship, partnership, S corporation, C corporation and limited liability corporation (LLC). Each type of business class comes with different tax rates. Your tax professional can help you determine the category with which your business best aligns. This decision alone could save you thousands in taxes every year.
6. Spread out your tax payments.
As a business owner, you should be sending in estimated tax payments throughout the year to avoid any kind of interest or big bill. This will also help spread out your payments throughout the year in more manageable increments.
If you have any reason to believe your tax payment will be a hardship, you can negotiate monthly payments to the IRS that will allow you to gradually pay off your tax bill. The IRS often works with businesses to develop payment plans that vary based on need and eligibility. However, beware of payment plans that have so much interest that they actually do more harm than good for your club.
Mike Jesowshek, CPA, is the founder of the accounting firm JETRO and Associates. He has a strong passion for both fitness professionals and technology. He helps provide a digital accounting, bookkeeping and tax solution for studio and gym owners who are looking to take their businesses to the next level by utilizing cutting-edge technology. JETRO is the official accounting firm of the Association of Fitness Studios (AFS) and supporter of SUCCEED!, AFS’ Business Convention and Expo.