Common Tax Mistakes Yoga Teachers Make (& How to Avoid Them)

There are a few tax mistakes that yoga teachers commonly make. Identifying these tax season pitfalls and learning how to avoid them can work wonders for your emotional state (and your bank account).

You’re a yoga teacher, not a tax professional. So, while you may be accustomed to providing help to others as they achieve their physical, mental, and emotional goals, it’s okay to sometimes step aside and be the one asking for help.

After all, tax season is not the time to be flexible. Working with a tax professional to understand how the tax system works and the requirements you must meet as a yoga professional, can save you from a bundle of tax penalties (not to mention a lot of frustration).

Before you dive into your taxes or rush out at the last moment for assistance, we’re here to give you some key pointers that you can use to avoid those painful tax season headaches.

KEY TAKEAWAYS: 

• Keep Accurate Records: Track all income, expenses, and receipts to simplify tax filing and maximize deductions.
• Claim All Legitimate Deductions: Reduce taxable income by deducting yoga-related expenses like props, travel, training, insurance, and memberships.
• Correctly Identify as Employee or Contractor: W-2 forms indicate employee status, while 1099-NEC forms mean independent contractor status with different tax obligations.
• Plan for Self-Employment Taxes: Independent contractors must pay their own Medicare and Social Security taxes, typically through estimated quarterly payments.
• Save for Retirement & Reduce Taxes: Investing in retirement accounts like a Solo 401(k), IRA, or SEP IRA lowers taxable income while securing future financial stability.
• Work with a Tax Professional: Getting expert guidance ensures compliance, maximizes deductions, and reduces stress during tax season.

Tax Mistakes to Avoid as a Yoga Instructor

While this is not a comprehensive list of the potential pitfalls you could encounter as a yoga teacher doing taxes, the mistakes found here are among the most common (and easily avoidable) tax issues that plague yoga professionals. Familiarizing yourself with them can help you streamline your taxes and avoid unnecessary stress.

Keeping Inaccurate Records (or No Records at All)

Whether you have a stringent schedule that you abide by or are more of a free-flowing, come-what-may kind of yogi, keeping records for your taxes is one area of life where you need to be consistent and organized. There are several reasons for this, and each one is compelling.

Keeping accurate records means tracking your income and expenses, knowing where money is coming from or going to, and keeping receipts and records of all of it. Why? Because all of this information will go on your tax return, and the more detailed your records, the easier it will be to provide the IRS with the information they require.

Apart from protecting you in the case of an audit, keeping detailed records helps you reduce your tax burden by claiming all of your possible deductions and write-offs. It also gives you a clearer picture of your cash flow, which is a valuable insight into how your business functions and how it could improve.

Not Claiming All of Your Legitimate Deductions

When you spend money on things directly related to the function of your business, you can deduct those expenses from your taxable income. In other words, you can drastically reduce the amount of money you are being taxed on and the tax burden you are responsible for.

While we recommend that you do thorough research into what qualifies as a tax write-off (or better yet, work with a tax professional who can help you), there are a few primary categories to be aware of, including:

• Yoga props and tools
• Travel expenses directly related to your work (workshops, for example)
• Yoga training courses and certification fees
• Yoga teacher insurance
• Yoga professional memberships
• Music subscriptions for your classes

The more deductions you can claim, the lower the taxes you pay will be. However, you will have to prove that your deductions are legitimate, so understand what qualifies and what doesn’t, be honest, and err on the side of caution when in doubt.

Identifying Incorrectly As An Employee Or Independent Contractor

Determining whether you are an employee or an independent contractor is one of the most vital parts of filing your taxes properly. Different rules apply to the two categories, meaning that misidentifying your employment status can cause serious complications when doing your taxes.

Thankfully, this is a pretty easy confusion to clear up. Simply check the tax documents that your studio(s) give you. A w-2 form means that you are most likely classified as an employee, whereas a 1099-NEC form implies that you are an independent contractor.

If you are an employee receiving a W-2, many of your necessary taxes are withheld for you. If you are an independent contractor receiving a 1099, you’ll want to read the next section.

Not Planning For Self-Employment Taxes

Being self-employed as an independent contractor means that you are responsible for 100% of your Medicare and Social Security taxes. Commonly referred to as “self-employment tax,” these additional taxes are easy to overlook if you are unaccustomed to paying them.

Most self-employed individuals make tax payments four times a year. These are called estimated quarterly tax payments and are calculated based on your projected income. Because your taxes are not withheld from your paycheck, you need to plan ahead and set aside money to make these quarterly payments.

Not Saving For Retirement (And Lowering Your Taxes)

Setting aside money for retirement is a wise thing to do, and it takes effort and planning–especially if you are self-employed. While saving for retirement is a good thing on its own, it also has a fringe benefit that many people overlook–it reduces your tax bill now.

Some of the best options for retirement savings are:

• Solo 401(k)
• Traditional or Roth IRA
• SEP IRA
• All of these retirement accounts have advantages, so do a bit of research and choose the one that is best for you and your goals.If you want to learn more about reducing your taxes, filing correctly, and getting through tax season stress-free as a yoga teacher, we encourage you to download our Tax Guide for Self-Employed Yoga Teachers ebook!