5 Common Tanning Tax Filing Mistakes and How to Avoid Them

1. Mixing Personal and Business Expenses
   • Confusing personal items with business expenses leads to incorrect deductions.
2. Failing to Track Cash and Daily Sales
   • Incomplete daily sales records cause underreported income and errors.
3. Ignoring Industry-Specific Tax Rules
   • Not accounting for tanning-industry regulations and tax nuances.
4. Improper Classification of Workers
   • Misclassifying employees and contractors results in payroll and reporting issues.
5. Missing Deadlines and Estimated Payments
   • Late filings and skipped quarterly payments incur penalties and interest.

Owning or operating a tanning salon comes with unique operational and financial responsibilities. One area where many business owners struggle is tax compliance. Understanding tanning tax filing mistakes and how to prevent them is essential to maximizing your salon’s profitability. This blog outlines the 5 most common tanning tax filing mistakes, along with practical information to assist tanning business owners in avoiding these costly errors.

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1. Mixing Personal and Business Expenses

Many salon owners will use their personal account or personal credit card for some of their salon’s business transactions, especially when it is small or new.

The Impact:

When salon owners mix their personal and business expenses, it becomes difficult to distinguish what is a legitimate deduction and what is solely a personal expense. This makes it more challenging for the salon owner to produce accurate financial statements, increases the likelihood of getting audited, and also exposes the owner to the potential of incurring penalties.

How to Avoid It:

• Open separate business bank and credit accounts.
• Use accounting software to categorize all expenses at the time of the transaction.
• Reconcile accounts monthly or quarterly to catch mistakes early.

2. Failing to Track Cash and Daily Sales

Many tanning salons have a significant cash component to their service and retail sales. This makes it essential to track daily revenues.

The Mistake:

If salon owners do not record their daily sales consistently or do not keep copies of their cash register tapes, their record of income will be incomplete, and they will not be able to accurately calculate their taxes.

Consequences:

• Understated revenue figures.
• Cost of goods sold (COGS) and inventory data that don’t match actual activity.
• Misleading profit and loss statements.

Best Practices:

• Record cash transactions at the time of sales.
• Choose POS systems that integrate with your accounting software.
• End each day with cash reconciliations and maintain copies of electronic or printed summaries.

ALSO CHECK - Tanning Tax Calculation Tips Every Salon Owner Must Know

3. Ignoring Industry-Specific Tax Rules

Paying no attention to the unique tax responsibilities associated with your salon can leave you vulnerable to costly tax filing mistakes, which directly impact your salon's profitability.

Key Areas of Industry Taxes to Pay Attention To:

• Your Sales Tax On Services and Products
• Your Federal Payroll Taxes Obligation
• Unique State Tax Differences for Tanning Services
• 10% federal tanning excise (Form 720)

Solution:

Consult a tax professional versed in service-based and retail businesses. They can ensure proper treatment of:

• taxable vs. non-taxable services,
• tax exemptions (if any),
• applicable state tax obligations.

4. Improper Classification of Workers

Often, owners confuse employee classification with independent contractor classification or vice versa.

Why This Happens:

Classifying an employee versus an independent contractor may seem small, but it can lead to big fines.

Repercussions:

• Incorrect payroll tax withholdings.
• Penalties for misclassification.
• Liability for unpaid employer taxes.

How to Get It Right:

• To avoid these issues, owners should use the IRS criteria each time for classifying an employee and an independent contractor.
• The owner should issue a Form W-2 to an employee and a 1099-NEC tax form to an independent contractor annually.
• Owners must evaluate the worker’s status continually throughout a worker's employment as the worker’s role changes.

5. Missing Deadlines and Estimated Payments

Late tax returns and ignored estimated tax payments are among the most costly tax filing mistakes.

Key Deadlines to Track:

Filing Type	Due Date	Frequency
Quarterly Estimated Tax (Federal)	Apr 15/Jun 17/Sep 16/Jan 15	Quarterly
Payroll Tax Deposits	Varies by payroll period	Weekly/Semi-weekly
Annual Federal Tax Return	Apr 15 (depending on structure)	Annual
State Tax Filings	Varies by state	Quarterly/Annual

What Often Happens:

• Salon owners miss quarterly deadlines.
• Lack of reminders leads to late submissions.

Avoidance Strategy:

• Use calendar reminders for all tax dates.
• Automate payroll and estimated payments.
• Work with an accountant to manage deadlines.

Common Impacts of These Mistakes

Making even one major error can lead to:

• IRS penalties and interest charges
• Underpayment or overpayment of taxes
• Inaccurate financial records
• Increased audit probability

Accurate tax filings allow for better financial planning and more confidence during audits, which will help grow your tanning studio business.

ALSO CHECK - Step-by-Step: How to File Your Tanning Tax with Form 720

Conclusion

Avoiding common tanning tax filing mistakes is not just about compliance. it’s about protecting your bottom line and ensuring your salon thrives. Focus on clean record-keeping, clear categorization of expenses, accurate worker classification, understanding industry tax rules, and never missing a deadline. These best practices, while simple, deliver powerful benefits when followed consistently.

If you would like expert help with preparing your salon taxes or to help ensure that the filing process goes smoothly, please contact the professional tax preparation experts at Efile720. They offer accurate and worry-free tax preparations.

Ready to streamline your tax filing? Visit efile720.com and get professional tax support today.

FAQs

1. What are the most frequent tanning tax filing mistakes salons make?

Some tax filing mistakes include:

• Mixing business costs and personal costs
• Not accurately tracking the daily cash from sales
• Not considering state and/or federal tax laws
• Inaccurate classification of employees
• Missing important tax filing dates or deadlines.

2. How can I separate personal and business expenses to avoid tax filing mistakes?

Maintain a clear distinction by:

• Establishing separate business bank accounts and credit card accounts
• An appropriate and reliable accounting system
• Reconciling the monthly statements of each account

3. Do tanning salons need to pay estimated taxes quarterly?

Yes, tanning salons normally must remit estimated tax payments, both on the Federal and state income taxes, every quarter.

4. What tax deductions are commonly overlooked by tanning business owners?

Common missed deductions:

• Inventory shrinkage
• Leasehold improvements
• Bed maintenance/professional fees

5. Should I hire a tax professional to handle salon tax filings?

Hiring qualified tax professionals can avoid tax filing errors. Professionals can ensure that you report your income correctly, classify your employees correctly, and meet payment deadlines. Visit efile720.com for expert assistance.