Larry Kopsa, a partner at York, Neb.-based Kopsa Otte, offers these handy tips to make sure you stay on the IRS’s good side.
No one wants to think about taxes. Fortunately, hair-salon-owner-turned-CPA Larry Kopsa can do some of your thinking for you. Kopsa, a partner at York, Neb.-based Kopsa Otte (www.kopsaotte.com), offers these handy tips to make sure you stay on the IRS’s good side.
> Commuting to and from work or school is not deductible, but other mileage might be. Examples of deductible mileage include visits to the post office, the supplies store, and to and from client appointments done outside of the salon. The IRS requires you to keep a detailed mileage log, so keep a notebook in your car or a log on your phone.
> Some travel expenses can be written off. Independent techs traveling to events such as New York Fashion Week can’t deduct their expenses. (NYFW is not considered a reasonable expense or destination.) Instead, Kopsa recommends taking your employees on smaller research-related trips to reasonable locations that are not too far from home. For example, if you’re based in Atlanta, you might take a trip to Myrtle Beach, S.C., to gather information on the industry, new styles, new colors, etc. This could be written off because the information you gather there helps inform your team and builds your business.
> Clothing damaged while at work can be written off at fair market value (use the Salvation Army site).
> A home office must be used exclusively for business and be used regularly (12 hours per week or more is a good rule of thumb) to be deductible. Shared offices in your home can’t be written off; therefore, if your office is in your kitchen or the office is also the spare bedroom, you can’t use it. Take note: The IRS can now travel to personally look at your home office, but don’t let that stop you from taking the deduction if you qualify.
> If you make a business-related purchase under $75, you don’t need to keep a receipt. Just record the transaction in your book or on your electronic device so you have good documentation.
> If you pay someone (like your child) to do little tasks around the salon, be sure to keep a time sheet and pay them a wage through payroll.
> Tips are taxable. Kopsa recommends breaking them out on tax forms (under miscellaneous or other income) and not including them with your total income, so that the IRS can see the differentiation.
For more up-to-date tax information, check out Kopsa’s blog at www.kopsaotte.com/blogs/salon-and-spa.