“Tax time, my favourite time of the year!” said no one, ever. For most of us, preparing a tax return is a process we just want done and done quickly. Rip the proverbial band-aid off, right? The problem is that rushing can lead to mistakes and missed opportunities, especially when running a health and wellness business. So what is the best way to tackle tax time as a clinic owner?
We’re glad you asked! Here is our list of crucial and often overlooked Do’s and Don’ts that will make your tax season a lot less stressful.
DO create an organized filing system for expenses. If you purchase anything for your health business, keep the receipt or invoice and place it into a designated folder. One simple tip: Before filing it away, mark down what each purchase was for to help keep track of different types of expenses.
DON’T classify future treatment plan appointments as income. This is a common mistake when running an outpatient rehab clinic. Until the paid service has been delivered it is technically a liability and should not be reported as income.
DO classify payments by loyalty points as income. Payments made using loyalty points need to be recognized as income, and the associated taxes need to be paid as well. If you do not recognize the revenue and the taxes for these sales you could be required to pay the fees plus penalties in the event you were audited by CRA.
DON’T classify gift cards as income. Similar to treatment plan future appointments, gift cards are technically a liability until used and should therefore not be considered income. The Gift Card was paid for in the past and you are redeeming a credit when applying a Gift Card to a sale. If you report Gift Cards as a payment you are inflating your overall payments received.
DO subtract taxes collected from gross revenue. You’re not making money on the taxes you charge so why include them as income? It’s not uncommon to run a sales report and mistakenly include the gross totals on your return, but in reality you should only be claiming the pre-tax amount.
DON’T assume your bookkeeper has enough information. Ensure you’ve given your bookkeeper or accountant everything you have from receipts to reports, it’s better to have and not need than need and not have.
DO run the correct reports available inside your clinic management software. Your system should track every appointment, invoice, and payment over the course of your fiscal year. This is a lot of data, so make sure you’re using the correct reports to claim everything you can. Juvonno users, you can find out Which Reports to Use at Tax Time (Year-End) here.
Sure, prepping your clinic’s tax return may still seem, shall we say, unappealing, but these tips will help ensure you’re maximizing your time and the health and wellness of your business. Remember, when it comes to tax time, good reports are your best friend. Now take these tips, get out there and kick some tax! (That sounded way cooler in my head).