List of Licenses and Taxes for new Massage Therapists
The following list contains some of the common types of licenses and taxes you may need to operate your bodywork practice legally. There may be more. Check with local authorities and a local accountant to be sure all your bases are covered.
City or County Business License
Available at City Hall or the County Court House. Usually based on gross income. When starting out, your estimated bodywork income should be low and therefore your Business License fee should be small.
City, County or State Massage License
Available at City Hall, County Court House or a State Agency. A state license is best since it allows you to work anywhere in the state. Fees in some large cities can be very expensive. Some localities have separate licenses for having a massage location in addition to actually doing bodywork.
Internal Revenue Service
You are probably familiar with filing your yearly income return. Unless you have been in business before, you are probably not familiar with Schedule C. Schedule C is the form on which you report your bodywork business’s gross income, expenses and net income (which is taxed). Gross income is easy, it is your total massage income for the year. For expenses, you should keep a WRITTEN record of all expenses you believe belong to your practice. Unless you have had previous experience with business bookkeeping and tax accounting you should use a tax preparer like an Enrolled Agent or a state licensed tax preparer. Your preparer may tell you that some of your expenses are not allowed or you have missed a commonly used expense. After this first experience you may be able to do your next Schedule C on your own.
State Income Taxes
If you live in a state that has a state income tax you will have to file a state return. Again, if you have been employed in the past you are familiar with filing a state return. The good news is that most states use your Federal Schedule C for calculating your taxable business income. Tax programs or internet services will automatically use your Federal Schedule C for the state return.
City, County or Special Districts Income Taxes
You may discover that a local income tax is levied by a local government entity. You should be familiar with this requirement if you have filed a tax return with either your employment or resident address inside the geographic limits of one of these entities. Common local income tax districts are city governments and school districts.
You enter a very complex accounting world when you decide to have an employee. You may be better off investigating whether an additional massage therapist could be classified as contract labor. A contract labor relationship requires very little paperwork. Check with a local accountant before you go this easy route and classify an additional massage therapist as contract labor. The accountant will give you guidelines for doing the contract labor relationship properly. If you have to go the employee route, use an online payroll processing service. You absolutely do not want to enter this complex and very time consuming employment accounting process when running a massage business.
If you decide to sell items like lotions or candles as a secondary profit center you will have to pay sales taxes. Paying sales taxes usually requires completing a report on a regular basis (usually quarterly). A tip, sometimes you can find a product wholesaler that will collect the sales tax from you as part of you purchasing their products and then send it on to the state for you. Thus eliminating sales tax paperwork.
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