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Accounting Tips for Yoga Teachers: Tax Benefits Associated with Being an Independent Contractor

As an independent yoga teacher, can you take tax deductions for the props that you purchase? Can you deduct rent if you teach from home? What about those new yoga pants you've been eyeing? Learn the tax benefits of being an independent contractor.

By Michael H. Cohen, J.D., M.B.A.

Yoga studios can hire yoga teachers either as employees or as independent contractors. Basically, businesses (including yoga studios) that hire employees are responsible for withholding a portion of salary to pay the employees' federal and state taxes, including income taxes, Social Security, Medicare taxes, and unemployment tax.

Independent contractors are responsible for paying their own taxes, relieving the employer of the legal obligation to withhold salary toward tax payments. For this reason, it's generally easier for the yoga teacher—particularly one teaching in multiple studios—to function as an independent contractor. In addition, as we'll discuss below, being considered an independent contractor can have significant tax advantages for yoga teachers.

Are You an Employee or an Independent?
What determines whether someone is an "employee" or an "independent contractor"? For tax purposes, the determining factor is how the U.S. Internal Revenue Service classifies the arrangement.

The IRS uses the classic "right of control" test to determine whether someone is an employee or independent contractor. Workers are considered employees if those hiring them for have the right to direct and control the way workers accomplish their tasks. Independent contractors, on the other hand, control the details of their work. In other words, when the hiring firm controls or directs not only the result of the work, but also the means and methods used to achieve those results, then the worker is considered an employee; when the hiring firm sets the desired result but leaves the means and methods to the worker's discretion, then the worker is considered an independent contractor.

For example, in a typical scenario, a yoga studio may hire a particular yoga teacher to teach two Ashtanga Yoga classes and one restorative class per week at specified times, but let the teacher control and direct the sequence of poses, the pacing, the exact verbalization of instructions and suggestions, the nature of adjustments, any readings during the class, and all other specified elements that make up an individualized class. This example makes it clear that the yoga teacher is likely to be considered an independent contractor.

The line between controlling and directing the result, and controlling and directing the means and methods, is not always so clear. Yoga studios, like other businesses, may have varying levels of control and direction.

How It Works
To help business owners and workers understand their legal obligations, the IRS specifies numerous factors that constitute right of control and direction over the worker's means and methods.

For an independent contractor, these factors include analyzing whether the worker furnishes the tools and materials needed to do the work, pays his or her own business and traveling expenses, sets his or her own working hours, or works for more than one firm at a time. Defining factors for an employee include whether the worker is told in what sequence or order to work by the hiring firm, works full-time for the hiring firm, provides regular oral or written progress reports to the hiring firm, or provides services that are an integral part of the hiring firm's day-to-day operations.

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