I’ve released my CPA license and I no longer give tax advice.
Determining whether you’re an employee or a contractor is a facts and circumstances test.
Here is the current advice on the IRS website.
If you are not an employee, then there is no way the gym would know how much you charge…so % would be hard to track. If the gym collects your money, then distributes it to you….then it would seem to me that there is something fishy going on because that would make you more of an employee than an indie. If they do the collecting, you use their equipment, and you are an integral part of their business, then they should be paying employee benefits. If you have a written contract as an indie, then 1099s are customary. If you are paying “rent” (as many gym owners like to call it) then they are acting as a renter, and as any landlord, would have to issue documentation of all income contributed by you to their business. Trainers that are employed by a facility also are paid a % of training fees, but are entitled to certain benefits. Unemployment? Insurance? As an indie, you are required to pay for your own advertising, insurance, self employment taxes, etc….so be sure to cover your bases on this one. Are you actually an employee or are you indeed an indie trainer? Get everything in writing.
As others have said, you would need to verify what to do with your accountant. I’m sure by now you’ve looked into it with a tax professional, but perhaps I can add some insight for others looking into this question.
Here’s my “personal trainer who is in the same situation answer” for you:
I am basing this on the extra details you provided; you mentioned that the client pays the gym, then the gym pays you a percentage of the revenue.
You cannot claim the revenue sharing the gym makes as a rent expense, or as any expense for that matter. Otherwise you would be “double dipping.” You are not paying the gym out of money you received; thus you have no taxable expense.
If you were paid by the client and then you had to pay rent to the gym, you would subtract the amount you paid to the gym from your gross revenue. The amount you paid to the gym lowers your net income and thus should be considered an expense on your taxes. For example, you receive $100 from a client and then have to pay 25% to the gym; your net revenue is $75 and you can claim the amount you paid to the gym as an expense on your taxes so you’re not paying tax on the full $100.
But if the client pays the gym and then the gym pays you a percentage, the “expense” as already been accounted for. For example the gym receives $100 from the client and then pays you 75%, your net revenue is still $75.
If the client pays the gym in these examples, you couldn’t take the $75 you earned as net revenue and “double dip” the $25 the gym received as an expense on your taxes, otherwise you would be showing you only had a net income of $50.
As for your status as an employee or independent contractor, I would still seek professional tax advice. But based on your other comments it sounds to me that you are a independent contractor as I am in the same situation.
If the gym doesn’t give you benefits, doesn’t take taxes out of income they pay you, doesn’t tell you how to train, or when, you’re an independent contractor. My guess is that if you make over a certain amount (I think it’s $400 or $600 per year) they would provide you with a 1099.
I don’t think it matters how the revenue is paid out. Think of it in this way. You can be an independent sub-contractor (i.e. electrician) and be paid by a general contractor for work you completed for a third party client. The client pays the general contractor which in turn pays you. That in itself doesn’t make the subcontractor an employee of the general contractor.
Hope that helps.