Few things are less inspiring than doing taxes, but let’s face it, the shoe-box-receipt-filing method won’t cut it forever (sorry, not even if it’s from your most fabulous pair). We know you probably didn’t get into the beauty business because you like to crunch numbers (unless you happen to be a Numbers Wiz), so we want to make your life a little easier this tax season.
We’ve tapped tax strategist Kenesha Coleman (aka @TheBeautyCPA), whose mission is to simplify tax season for beautypreneurs, to share some advice. As a CPA and a former IRS auditor, Kenesha knows all the tax-related tea and she’s spilling a few tips below for making your taxes easy, breezy, and maybe even a little beautiful this year.
As an independent beauty professional, keeping your business's financial data up-to-date, accurate, and organized is key. According to Kenesha, having your bookkeeping sorted into a profit and loss (P&L) statement is the primer for perfect tax filing. This can be tracked on a cloud-based accounting system, or even on a simple spreadsheet, but to really simplify the process you can track all of your income and expenses in the GlossGenius app with Reports. From there, you can easily export all of your bookkeeping data including your sales and expenses and seamlessly share it with your accountant.
Here’s a simple three-step process to compile a P&L statement:
When your tax return is prepared from a P&L, you’ll know exactly what you should report as income and what expenses you can deduct (more on that next!), plus you can easily assess how your business performed throughout the year–major #GlossBossMoves.
GlossGenius has also recently introduced a feature that enables independent contractors and salon owners to generate commission reports, which is extremely helpful, during tax season. This functionality not improves transparency but also facilitates effective management and accurate reporting of income. Booth renters can also easily set up a bank account ensuring the segregation of funds, for tax purposes and promoting streamlined and efficient financial management.
One of the biggest missteps when managing a beauty business is not taking all your tax deductions. Kenesha says most beautypreneurs are overpaying in taxes because they fear certain deductions are red flags that may lead to an audit. This, she says, is usually due to a lack of understanding of what business expenses can be deducted. Her rule of thumb is simple: If it relates to your business (even partially), deduct it.
"If it's legit, take it! Do not voluntarily overpay in tax because of your fear of the IRS,” The Beauty CPA says. “I can tell you that the IRS does not have a malicious agenda to prey on small business owners. They understand that you are entitled to every legit business tax deduction no matter how big, small, or unusual it looks on your tax return.”
One of the easiest ways to track expenses is through GlossGenius’s all-in-one bookkeeping and payment platform. The in-app expense management tools let you snap and save photos of your receipts, set up recurring expenses, categorize each transaction, and more.
Salon owners now have the option to allow booth renters to independently handle their finances using the app. This introduced feature gives each professional the power to control and understand their matters, which proves particularly advantageous when dealing with tax responsibilities.
Last, but not least, take some time to review your tax return. Be sure to fully understand how your business’s financial information is being reported. You should be able to reconcile the P&L statement you have compiled to your tax return. If there are any differences, you (or your tax professional) should be able to explain why. Also, double-check for errors or missing information.
As you prepare to review your tax returns, don't forget to utilize our comprehensive tax content designed to guide salon owners through the tax season. Whether you're navigating your 1099-K like a boss, or looking for tips specifically tailored to salon owners, GlossGenius has you covered. And for an extra helping hand, our free workbook is the perfect companion to ensure you're managing your taxes efficiently. Keep it flawless, bosses!
Interested in trying GlossGenius? Sign up here for your free 14-day trial.
Don’t forget, after your trial, you can totally deduct this from your taxes next year!