Tax Tools and Tips for Health Coaches: The Ultimate Guide

Paying taxes can be stressful for health coaches and other small business owners, especially if you’re new to running your own business or you’re juggling multiple income streams. What if you make an accounting mistake, or lose a receipt, or forget to include some small thing that throws everything off? 

All the details and requirements can feel overwhelming, but with the right tools and a little planning, you can navigate your taxes with confidence.

Tax Status for Health Coaches: Should I Be a Sole Proprietor, an LLC, or an S-Corp?

Here’s how different business structures can impact taxes:

• Sole Proprietor: The simplest structure—your business income and expenses are reported on your personal tax return (Schedule C).
  • You don’t have to register your business ahead of time or fill out any small business paperwork, but you are still responsible for self-employment taxes and quarterly estimated tax payments.

• LLC (Limited Liability Company): Provides liability protection while still being taxed like a sole proprietor, unless you elect to be taxed as an S-Corp.
  • To form an LLC, you’ll need to file paperwork with your state, which usually includes choosing a business name, submitting an Articles of Organization form, and paying a registration fee. The LLC registration is typically a one-time process, though you may need to file annual reports depending on your state.
  • If you elect to be taxed as an S-Corp, that requires additional steps, including filing IRS Form 2553. The LLC structure can be beneficial for protecting personal assets, but it requires some upfront paperwork.

• S-Corp (S Corporation): Can reduce self-employment taxes at higher income levels, but requires additional paperwork, payroll setup, and administrative costs.
  • You’ll need to register your business as a corporation first, usually by filing Articles of Incorporation with your state, and then elect S-Corp status by filing Form 2553 with the IRS. 
  • Once you’re an S-Corp, you’ll need to set up a payroll system for yourself and any employees, ensuring that wages are paid out regularly and taxes are withheld. This setup requires ongoing administration, including submitting payroll taxes and possibly quarterly estimated tax payments.
  • While it can offer tax savings, the additional registration and ongoing paperwork may not be worth it unless you’re making significant income.

Your business structure affects more than just taxes—it also affects liability protection, administrative responsibilities, and long-term financial planning. Choosing the right setup is an important decision, and what works best depends on your specific situation. If you’re unsure, consult a tax professional for guidance (or ask your fellow coaches to share their experience).

Before You File: Pre-Planning for Taxes

A little preparation goes a long way in making tax season easier. By staying organized throughout the year, you’ll avoid last-minute stress and have everything you need when it’s time to file.

1. Track Your Income and Expenses. Keep detailed records of all money coming in and going out of your business. A simple spreadsheet, bookkeeping app, or accounting software like QuickBooks or Wave can help you stay organized. Good record-keeping not only makes filing easier but also ensures you’re capturing every possible deduction.
   
2. Choose a Bookkeeping System. Whether you opt for a cloud-based software that automates expense tracking and invoicing or you use a manual spreadsheet, consistency is key. A well-maintained system saves time and reduces errors when filing your taxes.

3. Understand Estimated Taxes. If you’re self-employed, you may need to make quarterly estimated tax payments, since taxes aren’t automatically withheld from your income. Skipping these payments can lead to penalties (though some people choose to accept the penalty so that they can simply pay all at once when they file).

4. Set Aside a Percentage of Your Income. Many coaches set aside 25-30% of their earnings for taxes. Keeping these funds in a separate savings account can help you avoid financial surprises and ensure you have enough when it’s time to pay.

Taking these steps throughout the year can make tax time far less stressful. The more organized you are upfront, the smoother the filing process will be—so taxes never stand in the way of your coaching success.

Reducing Your Tax Bill: Claim Eligible Deductions

One of the perks of running your own business is the ability to deduct eligible expenses, reducing the amount of your income that’s subject to taxes. Deductions can really help small business owners by significantly lowering your tax bill—if you track them properly.

As a health coach, many of your business expenses may be deductible. To determine whether your specific expenses are deductible, consult a tax professional. Common tax deductions for health coaches include:

• Home Office Deduction: If you use part of your home exclusively for business, you may qualify for a deduction. This can include a percentage of rent or mortgage interest, utilities, and even HOA fees in some cases.

• Business Expenses: Costs like website hosting, marketing, professional development, liability insurance, and office supplies can often be written off.
  
• Travel and Meals: If you travel for business or meet clients for meals, some of those expenses may be deductible. The IRS allows for a percentage of meal costs, while travel-related expenses such as airfare and lodging may also qualify.

• Retirement Contributions and Insurance: Contributions made to a solo 401(k) or SEP IRA can reduce taxable income. Health insurance premiums may be deductible for self-employed individuals.

• Bookkeeping and Software: Business management tools, including accounting software and client management tools like SimplePractice, can typically be deducted.

Remember, deductions are only as valuable as your records—because if you don’t track your expenses, you can’t claim them. Keeping clear, well-organized financial records is key to maximizing deductions and avoiding missed opportunities. Consider hiring a bookkeeper if this isn’t your strength.

Do I Need an Accountant As a Health Coach?

An accountant can help plan and organize your tax inputs, optimize deductions, and ensure accuracy so you don’t have to worry you’ve missed something when you file. But even with an accountant, you’ll still need to track your income and expenses throughout the year to provide them with accurate records.

Some things to consider:

• Ask your network for recommendations—you may even find someone who works specifically with health coaches.
• If you have a straightforward tax situation, DIY tax software (e.g., FreeTaxUSA, TurboTax, TaxSlayer) may be enough for you.
• If you have multiple income streams, an LLC, or significant deductions, hiring a CPA (Certified Public Accountant) can help you avoid costly mistakes. Search for CPAs licensed in your state, or consult the IRS’s database of tax return preparers here.
• When choosing an accountant, look for someone with experience working with small businesses and service-based professionals.

Even if you handle taxes yourself now, your needs may change as your business grows. Having a trusted accountant in mind can make the transition easier when the time comes.

For Health Coaches Working Outside the US

Tax obligations and processes vary significantly by country. If you’re a health coach practicing outside the US, you’ll need to follow different regulations and strategies to optimize your tax situation. To ensure you’re meeting all legal requirements and making the most of available benefits, we strongly recommend consulting a tax professional familiar with your country’s tax laws.

FMCA-trained health coaches work in nearly 100 countries worldwide. Below, we’ve gathered some basic tax information from a few of the top countries where FMCA students practice. Check it out if you’re looking for a helpful starting point, and be sure to confirm details with a professional: 

Given the complexities and regional differences in tax regulations, it’s essential to consult with local tax professionals to ensure compliance and optimize your tax strategy.

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Bringing It All Together…