Tax Advice for Professional Pet Sitters
Please note: While the following post contains tax advice from financial professionals, it’s important to realize that your business and tax situation are unique. Consult with your accountant to ensure you are filing taxes properly.
As a professional pet-sitting business owner a big part (although likely not your most favorite part) of your job is actually being a business owner. For many, the pet sitting comes easy—from dog walks and cat visits to continuing education in pet behavior, health and first aid—and the “pet part” is the “best part.” The other part, however, the “business part” of paperwork, documentation, scheduling, taxes and accounting, is not nearly as fun for most—but equally important. Keeping on top of your accounting and understanding tax deductions for pet sitters can save you time and money.
In a previous survey conducted by PSI, 48 percent of members indicated they use an accountant for their pet-sitting businesses, while 52 percent choose to handle taxes and accounting on their own.
Whether you choose to work with an accountant or handle taxes on your own, it’s important to have a working knowledge of tax requirements for small-business owners.
To learn more about the “need-to-know” tax knowledge pet-care business owners should have, we reached out to U.S.-based CPA Evan Hutcheson.
A Q&A with Evan Hutcheson of Evan Hutcheson, CPA, LLC
Should pet-sitting and dog-walking business owners file taxes quarterly or annually?
Like most tax answers, it depends. The owners will file taxes annually, no matter what—but could be required to make quarterly payment if their income is high enough throughout the year. Small-business owners should really look into filing quarterly taxes to avoid being hit with a huge tax bill at the end of the year.
Because they are self-employed, how can they best determine how much of their income they should “set aside” for state and federal taxes?
While other sources of income and deductible expenses will play a role in this, it would usually be between 20 and 33 percent, depending upon income.
Can mileage and automobile-related fees both be deducted (or only one or the other)? What proof do they need of mileage to be able to claim it?
[A business owner] can either claim mileage or actual expenses plus vehicle depreciation. If you want to use mileage, which is the more popular choice, you need to have a log book indicating the date, the destination, the mileage and the business purpose.
If a business has staff sitters (employees or independent contractors), what do they need to provide to their staff sitters for tax purposes?
If staff sitters are independent contractors (ICs), the ICs should fill out a W-9 for records. Then, at the end of the year, they should issue those contractors 1099s. If employees are used, employees would need to fill out W-4s and the owner would need to set up payroll with the government so that payroll taxes can be submitted.
For businesses with staff, do they deduct fees paid to staff as business expenses and do they need to use a Schedule C?
Businesses can deduct staff pay. Sole proprietors and single member LLCs can file schedule C. Partnerships and multimember LLCs file Form 1065, which is a separate tax return altogether. Corporations file an 1120 or 1120-S.
What are some business deductions that pet sitters and dog walkers may not typically think of?
Business deductions pet sitters and dog walkers may not think of include dog food (if provided to clients), business use of their home, business supplies, advertising expenses, office expenses, professional fees (such as association memberships) and travel-related expenses for professional events and conferences.
Do you have more questions? Evan Hutcheson can be reached via his website, www.evanhcpa.com, or by phone at (615) 727-2295.
Tax advice for Canadian pet sitters
For Canadian-specific tax advice, we also reached out to Debbie Pearl-Weinberg, Executive Director, Tax & Estate Planning at CIBC Financial Planning & Advice. She shared that tax returns are generally filed annually, and, in most cases, quarterly or monthly installments are required. She advises Canadian pet sitters to visit this website link for more information on installment requirements for individuals as well as information on determining how much you should plan to set aside for federal and provincial/territorial taxes: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/making-payments-individuals/paying-your-income-tax-instalments.html. She also shared that Canadian pet sitters can deduct expenses they incur using an automobile for their businesses and recommends visiting this link to calculate the amount of motor vehicle expenses you can deduct: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses/motor-vehicle-expenses.html.
In regard to tax returns for Canadian pet-sitting businesses using staff, Pearl-Weinberg recommends first reviewing the CRA website (www.canada.ca) to understand the differences between an employee and an independent contractor. She advised that employee-related expenses (including income paid) should be reported on a form T4, but those using independent contractors may need to report payments on form T4A.
Keep in mind, your tax requirements will vary by your country, business structure and income, so it’s advisable to reach out to a local tax professional with any specific questions you may have.
Selecting an accountant for your pet-sitting business
Although the majority of pet sitters who responded to PSI’s last survey indicated they handle their own taxes, it’s a really good idea to find an accountant to assist you with necessary recording keeping, unless your pre-pet sitting career involved bookkeeping or tax preparation.
Shop around when searching for an accountant and look for one that specializes in helping small-business owners. You should ask local pet sitters or other local small-business owners for recommendations and then interview a few accountants before deciding.
Remember, accounting fees and expertise vary, so don’t be shy about asking for fee information, credentials and references from the accountants you meet.
An accountant will help you set up your books, do your payroll, and apply for any necessary identification numbers. An accountant can also save you some time by supplying the forms you’ll need, such as state and federal payroll tax forms.
Although accounting procedures may at first seem overwhelming to a new business owner, a good accountant will soon have you trained and knowledgeable about the financial side of your business. Even if you still opt to handle taxes on your own, paying for a consultation with a local accountant can give you assurance that you have the information you need to handle this aspect of your business yourself.
Additional resources
The following websites may provide helpful information regarding your tax obligations, as well as tips on tax deductions for small-business owners.
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Jan Koehler Caring Pet Sitters
Helene O'Neill