By Mike Jesowshek, CPA | General Business , Payroll , Taxes
Learn more about independent contractors versus employees specifically related to fitness studios and gyms by clicking the link below for an article posted on the Association of Fitness Studio’s blog.
Independent Contractor or Employee – How to Pay Them Correctly
By Mike Jesowshek, CPA | Payroll , Taxes
It is common practice this time of year for employers to give employees gifts. Where the gift is infrequently offered and has a fair market value so low that it is impractical and unreasonable to account for it, the gift’s value would be treated as a de minimis fringe benefit. As such it would be tax-free to the employee and tax deductible by the employer.
A gift of cash, regardless of the amount, is considered additional wages and subject to employment taxes (FICA) and withholding taxes. Caution: if the gift recipient is a W-2 employee, the employer may not issue them a 1099-MISC for a holiday gift of cash; the amount must be treated as W-2 income. Where an employer gives gift certificates, debit cards or similar items that are convertible to cash, the value is considered additional wages regardless of the amount. However, if the gift is a coupon that is nontransferable and convertible only into a turkey, ham, gift basket, or the like at a particular establishment, the gift coupon would not be treated as a cash equivalent.
Holiday group meals, cocktail parties, picnics or the like for employees are also treated as de minimis fringe benefits.
The entire team here at JETRO would like to wish you and your family a Merry Christmas!
By Mike Jesowshek, CPA | Bookkeeping , General Business , Payroll , Taxes
Starting up your fitness studio or gym is an exciting time, but it is also a time with many questions. While it may seem initially very easy to open a studio and start training, the financial aspects of being successful are a bit more challenging. As you consider the process of starting up, work with a accountant to ensure you get your financial footing in place now. Ask these questions.
#1: What should be in a basic business plan?
A business plan should outline each detail of your fitness studio including who will run it, how much you’ll charge, and what you expect to earn. Putting time into creating a thorough business plan is important. Work with your team to ensure your plan is accurate and represents your business well.
#2: Who will you need to pay taxes to?
Your local jurisdiction and state have specific taxation requirements. Youmay have to pay taxes on sales, but also costs associated with payroll. Ensure your accountant not only talks to you about who you need to pay, but payment deadlines as well.
#3: What is a projected cash flow for the fitness studio?
How much cash does your company need to keep on hand? The key here is to be able to anticipate how much it will cost you to operate your fitness studio. Many companies should not expect to have positive cash flow for at least a year, often longer. Your professionals can help you decide what your cash flow projections are.
#4: How much of an investment do you need to put into your fitness studio right now?
Your financial team can help you project the cost of setting up your new studio. This will include costs related to establishing the physical business and paying for equipment. Your initial investment generally will be the highest amount put into the company by the founder.
#5: What is your break-even analysis?
This may be an important question to ask early on. How much do you need to make to break even? You’ll want to talk to your financial team about the timeline for this and what can be done to help ensure you break even as soon as possible.
#6: What liability insurance do you need?
While most tax professionals don’t offer recommendations here, having adequate policies to cover potential loss is important. Work with your team to ensure you have comprehensive protection to minimize risks against your company’s financial health.
#7: What will interest cost you?
Interest on loans is not something to overlook. You’ll want to ensure you have an accurate representation of how much you are paying in interest so you can make adjustments to pay off any borrowed debt sooner, make better decisions about borrowing, or factor in the cost.
#8: How will you manage payroll?
This is a very big component of starting up since it can be troublesome for most startups to actually know how to pay employees and meet all federal and state requirements. Working with a payroll provider is often the easiest option (and most financially secure since paying an employee to do this work tends to be more expensive).
#9: How can you reduce your taxes?
Tax professionals will work with you to determine if there are any routes to reducing taxation on your business including local incentives that may be available. You’ll also want to talk about projects taxes, investments that could reduce taxes, and having all possible deductions in place.
#10: What’s the right profit margin/industry benchmarks?
Working with a financial team often comes down to this question. How much should you charge to make the best profit possible while still ensuring your company can grow? It’s not a simple question, but having the right team by your side ensures it will be clarified as much as possible.
