Business & Tax Tips with John Briggs
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In fact, welcome to Trulyfit, the online fitness marketplace connecting pros and clients through unique fitness business software.
Meet John Briggs: Founder of Insight Tax and Accounting
Steve Washuta: Interestingly, welcome back to the Trulyfit podcast. John, thank you for joining me for round two. I want to give listeners who missed the first episode some insight — pun intended. Let’s talk about who you are, your company, and how it connects to health and wellness.
John Briggs: Notably, i’m the founder of Insight Tax and Accounting. We now have about 110 team members, a lot more than during our first conversation. We’re located in Utah and serve a wide range of service-based businesses. We have a high concentration of over 500 fitness professional clients. My day to day is spent mostly training my team, making sure they deliver to the standard I want. We love working with fitness professionals. I even wrote a book, Profit First for Micro Gyms. I owned a gym for three years so I could understand our clients better. Honestly, I wasn’t a great gym owner, but we were really good at managing cash. We weren’t good at marketing, though, so there wasn’t much cash to manage in the first place. Ultimately, owning that gym helped me understand my clients a lot better. That was the goal.
Why John Briggs Built a Firm Focused on Fitness Professionals
Steve Washuta: As it turns out, did you see a hole in the market? You had run a gym, so you were already connected to the industry. Did you notice that gym owners didn’t have a specialist to turn to?
John Briggs: To that point, it’s interesting — we actually decided to specialize in serving fitness businesses before I got into it myself. We saw the data. The gyms that seemed most successful, generally speaking, offered group training, personal training, and nutrition, like a three-legged stool. That gave them three different ways to bring someone in and then sell them the other two services. We do have clients who only do personal training or only group classes, and some of them work out fine. But statistically, the three-legged model performed better. When we shared that data with clients, they’d say, “That’s great, I’m going to implement that.” Then nothing would happen. I’d ask if they’d actually implemented it, since I wasn’t seeing any expenses suggesting they had. They’d walk me through their challenges, and I didn’t fully understand until I lived it myself.
Overall, i remember the gym I bought didn’t offer personal training at the time. When I looked at a common structure gyms use — what’s sometimes called the fortnight’s model — trainers would get around 44% of the revenue. That was a much better rate for them. The pushback I got was shocking, even though I was offering to pay people more per hour. Trying to understand where they were coming from was incredibly helpful. In a way, we specialized in it first and learned the rest afterward.
The Case for Personal Training Over Cheap Memberships
Steve Washuta: For context, i find it confusing when gyms don’t offer personal training, given the percentages you can take from it. You can bring in trainers to do the work and still take a large cut. Take a gym like Planet Fitness, which doesn’t offer much personal training at all — they’re in the red. I get that they’re on the NASDAQ, but they’re carrying a lot of debt. I don’t understand the business model. Why wouldn’t a gym push personal training instead of relying on a $10 membership?
John Briggs: That said, there are two distinct models in this space. One is “I have equipment, I’ll rent it out” — that’s Planet Fitness. They couldn’t handle it if every member actually showed up and used their membership. Part of the appeal is that it’s so cheap per month that canceling feels like more hassle than it’s worth. The other model is, “We’re going to give you a lot of focus.” You pay more than $10 a month because you’re paying for expertise, not just renting equipment.
Steve Washuta: Meanwhile, i call that the hot dog versus steak problem. If you buy a pack of hot dogs for $2 on sale, there’s a good chance they’ll sit in the back of the fridge. You’ll throw them out two months later. If you buy a T-bone steak, you’re eating it within 36 hours, because you spent real money on it. I’d love for you to explain the different acronyms in your industry. What’s the difference between a CPA, a tax specialist, and an accountant? What exactly qualifies someone for the job, and what are they allowed to advise on?
CPA, EA, or Bookkeeper: Decoding the Accounting Acronyms
John Briggs: In terms of education and testing, the CPA is the highest level in the industry. It stands for Certified Public Accountant. The exam has changed since I took it and keeps evolving, but it’s intense and comprehensive. The joke is that it covers so many areas that the acronym might as well stand for “Can’t Pass Again.” As a tax specialist, only about 15% of the material actually relates to what I do day to day. If someone calls themselves an accountant, that usually means a higher level of experience. They don’t just do taxes, they likely also handle bookkeeping. Bookkeepers, in most cases, don’t fully understand taxes, but they sometimes still give that advice and get clients in trouble. On the tax side, you might also come across an EA, or Enrolled Agent.
In particular, that’s someone who passed a specific test on IRS procedures, so the IRS is willing to talk to them on your behalf. CPAs, EAs, and licensed attorneys are really the only three types of professionals who can speak to the IRS directly for a client. If it’s just an accountant or a bookkeeper, you as the taxpayer have to deal with the IRS yourself.
What to Expect From Your First Meeting With a Tax Professional
Steve Washuta: Ultimately, i’d love to walk through a client experience, especially from a fitness or gym perspective. Say I come to you and say, “Hi John, here’s my business, here’s my personal situation, here are my assets.” How does that initial meeting go? What should a professional like me expect when talking to a professional like you?
John Briggs: In fact, the first thing I try to understand is what the client expects. We rely heavily on referrals. For a lot of firms, growth mostly comes from existing clients referring people they know. But that can be a double-edged sword. The person who referred you might have had a different level of service, or a different expectation than you need. For example, I have a long-term client who was doing year-end planning. He laid out a list of things he wanted to accomplish, because his business was adding new ventures. Looking at his list, I realized it was essentially asking for outsourced CFO services, which we do offer to a few clients. In his case, though, we didn’t have the capacity. I appreciated him laying out his expectations clearly. I explained that with our current capacity, we could still hold year-end planning meetings and handle the tax work.
But we weren’t in a position to offer the weekly meetings he wanted at a quality we’d be happy with.
Managing Expectations With Your Tax Professional
John Briggs: Interestingly, knowing what you actually want from a professional matters. The joke is that if you ask a bankruptcy attorney for advice on buying a car, they’ll tell you to file bankruptcy. To them, everything looks like a nail, and they’re the hammer. Accountants tend to have specialties or areas they’re comfortable with. We regularly meet new clients making a lot of money without the right tax structure. When we ask why they haven’t set up an S corp, they’ll say their accountant told them it wasn’t necessary. It turns out that accountant doesn’t even file S corp returns, only Schedule Cs. Taxpayers end up overpaying simply because a professional tries to fit them into whatever they’re capable of doing. Not everyone is upfront about what they can and can’t handle.
So managing expectations is critical. In a good first meeting, the professional should ask questions that pull out your expectations.
Notably, what are you looking to get out of the relationship? Where are you trying to take your business? And why did you want to meet with me in the first place? From there, a dialogue should unfold. It should leave you either confident this person can help, or aware that they don’t have the right experience.
Learning to Say No: Finding the Right Clients
Steve Washuta: As it turns out, that’s true for us too. I might work best with seniors — say a 67-year-old woman with COPD and bilateral hip replacements who has a movement disorder. If she refers me to her grandson, an eight-year-old competitive swimmer, I can technically work with him. But I’d have to do my due diligence, because that’s not my specialty. When you’re new to the industry, though, you want all the work you can get, so you have to watch out for that. I’d imagine it’s the same for tax professionals. When you’re just starting out, you take on anybody, even outside your specialty, because you need the clients.
John Briggs: To that point, guilty as charged. When I first started, I left the firm I was with because they hadn’t paid me in six months. I needed to put food on the table. I joked with people that I was basically a prostitute about it. It didn’t matter what the work was or what someone was willing to pay — I just needed clients and money coming in. That wasn’t a great strategy, because I made my own bed. It took about three years to cycle out clients who weren’t a good match. Not bad people, just not what I was ultimately hoping to build toward. The clients you take on tend to refer more people like them. If the only thing a client cares about is the cheapest price possible, that’s not the client base you want long-term. It took time to sort through that.
Why Weekly Bookkeeping Matters for Gym Owners
Steve Washuta: Overall, can you talk about why weekly bookkeeping is so important? Say a personal trainer works at a few different gyms and out of their house. They charge everything to one business account under an LLC they set up themselves. At the end of the year, they just print it all out and hand it to you. Why do they need ongoing bookkeeping?
John Briggs: If you hand your bank statements to an accountant at the end of the year, they’re going to charge you to compile all of that. A list of transactions alone doesn’t tell us what actually happened in the business. If you’re ever audited, bank statements are the first thing the IRS will pull, whether you give them or not. They’ll build their own report with no knowledge of your business, in a way that’s favorable to them. Every deposit becomes income, and every expense is treated as not deductible. Without bookkeeping, you’re running the risk that they’ll audit you and land on a conclusion that doesn’t reflect reality. Then you’re stuck trying to reconstruct your own categorization after the fact. Maybe a deposit was actually a personal contribution to cover bills, not income. Or a big deposit was really a loan, not revenue.
What Happens If You Skip Bookkeeping
John Briggs: For context, classifying transactions the right way as you go helps you save on taxes. Misclassification by the owner, a spouse, or a friend dabbling in QuickBooks is something we see constantly, and it usually means overpaying. The third reason bookkeeping matters is that accounting for things correctly creates a running history of what your business did. There’s a reason we study history: it lets us learn from the past. It’s no different with your bookkeeping. When you look back and see the business trending in one direction and then changing, that should prompt questions. Why did it change, and was the change good or bad? If it was good, you want to do more of it. If it was bad, you want to stop. The history doesn’t just report what happened. It leads you to ask the right questions to make the business better going forward.
Common Bookkeeping Mistakes in the Fitness Industry
Steve Washuta: That said, you mentioned a few examples already, but can you talk more specifically about the health and fitness industry? What do you see gym owners get wrong time and time again that would be an easy fix with the right help?
John Briggs: Meanwhile, the first thing that comes to mind is dues and subscriptions. Gym owners tend to accumulate a lot of different subscriptions. Once we sit down and analyze the vendors together, they usually realize there’s a lot of overlap. They can typically cut some of those tools without losing anything, because one remaining subscription accomplishes what several were doing. As far as bookkeeping goes, it’s common to see money put into the business personally, or a loan misclassified. That ends up inflating income and expensing things the wrong way on the books — a real problem if the IRS ever catches it. Those are the main issues we see.
Should You Ever Borrow Money From Your Own Business?
Steve Washuta: In particular, this might be outside your wheelhouse — feel free to say so if it’s more of a certified financial planner question. But as far as borrowing money from your business goes — is that always a bad idea? Even if you have a lot of equity built up and need a loan, personal or otherwise?
John Briggs: Ultimately, you mentioned Elon Musk’s example earlier. He doesn’t pay himself a salary because his compensation comes through shares. That works for Elon because his business is large enough that a bank can underwrite against it. They can say, “Your business is worth this much, we’re willing to lend against that value.” Small business owners don’t have that opportunity. Most of us haven’t taken a company public, and going public is what allows equity to trade in a liquid market. As private businesses, our equity is illiquid, so banks won’t lend against it. If things go south, they can’t easily sell the collateral. Borrowing against the business generally isn’t recommended for a small business owner.
Why John Briggs Recommends Distributions Over Business Loans
John Briggs: If you’re audited, the IRS expects to see a loan agreement treated as an arm’s-length transaction, with monthly payments and interest expense. Most business owners don’t actually do that. The main reason we don’t recommend it is that it’s unnecessary. As the owner of a small business, you can take money out of the company whenever you want. You simply call it a distribution. Distribution, shareholder draw, and owner’s draw all refer to the same thing. It’s money moving from the business bank account to you, classified under equity. If you need to put money back in, that’s an owner’s contribution, also an equity account. None of it affects your taxable income, the same way a loan wouldn’t. So instead of complicating things with a formal loan, if there’s money there to take out, just take it out.
Is the IRS Really Getting Bigger?
Steve Washuta: In fact, it seems like the IRS is growing — the scope of what they’re taking on seems larger. Are you concerned about that? Are they growing because they actually need the bandwidth, or is this just government bloat?
John Briggs: Interestingly, i think most government spending is bloat. I’m not a fan of entitlement programs, and I don’t see evidence that they do much beyond buying votes, which I find disgusting. But to answer your question, you have to go back to 2018. That’s when President Trump passed the largest tax reform since the inception of the tax code in 1913. Part of that reform massively decreased the IRS budget and froze IRS hiring. For the last five years, we’ve had an understaffed IRS. I wasn’t a fan of the funding the Biden administration later allocated. The good news is that it’s structured in tranches, given incrementally over several years. It will likely take three to four years just to get back to 2018 staffing levels. So yes, they’re growing, but it’s mostly restoring the cut that happened under Trump. Right now, I wouldn’t call the IRS bloated.
Why John Briggs Says Most IRS Letters Are Wrong
John Briggs: As professionals, we wait on hold for hours even with a special hotline for CPA firms. I can’t imagine what a regular taxpayer experiences trying to call them. That said, they’ll always try to overreach. One reason I’m drawn to this field is personal: I was bullied as a child. Even later as an employer, I had a hard time firing people because I still wanted approval from others. I’ve come to see the IRS as one of the most empowered bullies out there, with a lot of latitude to act. So if you ever get a letter from the IRS, there’s a high likelihood — probably above 80% — that the letter isn’t fully correct. If they’re asking you to pay money, chances are it’s not the right amount. That doesn’t mean you don’t owe anything.
But they know a high percentage of taxpayers will just pay whatever’s asked, because dealing with the IRS is scary. My heart rate goes up too when I open something from them, and I deal with this constantly. Don’t just accept a letter at face value. Get advice from a professional who can protect you, because without that protection, they will push.
The Biggest Red Flags That Trigger an IRS Audit
Steve Washuta: Notably, what’s a major red flag that makes the IRS more likely to come after someone? I’d imagine they’ve compiled data — like, “these 100 people who got audited all had one or two things in common on their returns.” What would that be?
John Briggs: As it turns out, one of the biggest ones is a personal return with a Schedule C business that shows a loss. A good tax professional can help you avoid it. The last stat I saw was that over 90% of audited returns had a Schedule C with a loss. Sometimes that makes sense. If you have a lifestyle business bringing in income, you might legitimately expense a lot of what you’d have spent money on anyway. That means paying very little tax. That works well until you try to sell the business, which is a different story. A lot of our clients also have a W-2 job outside the fitness business, or their spouse does. So a high W-2 income paired with a Schedule C loss is a real problem.
To that point, with a good tax professional, you’d likely have a better entity structure than filing business activity directly on your personal return, probably an S corp. You should still meet with a professional to confirm that’s right for you. A separate entity filing goes to a different department within the IRS, and those departments don’t always talk to each other well. That helps you avoid some scrutiny.
The Home Office Deduction Red Flag
John Briggs: Overall, the second common flag is claiming a home office deduction using the “business use of home” form. That form exists partly so the IRS can flag who to audit. If you take even one personal call in the space you’ve designated as your office, they can say the deduction is void. It sounds extreme, but everyone does personal things in their office space. So we generally don’t recommend using that form. Instead, we recommend a strategy called corporate rent, also known as the Augusta rule. It’s a much better way to use your home to reduce taxes than a form that offers a small benefit while significantly raising your audit risk.
Married Filing Jointly and Audit Risk
Steve Washuta: For context, let’s talk about both of those. We’ll come back to the corporate rent piece, but first, take an example. A husband works a regular marketing job, and a wife runs a Schedule C yoga business that isn’t profitable yet. It’s year one, and she’s bought more equipment than she has clients for. If they file together and report the business loss, they’re still net positive overall because of his income. Does that still raise their audit risk?
John Briggs: That said, yes. You’d want to file together anyway, since married filing jointly is the best tax bracket. Married filing separately is one of the worst. But his high W-2 income combined with her Schedule C business running at a loss would still increase their audit risk.
The Augusta Rule: A Smarter Home Office Tax Strategy
Steve Washuta: Meanwhile, going back to the corporate rent strategy, how does someone actually implement that, instead of just writing off the square footage of their office?
John Briggs: If you write off the square footage of your office — say a 150 to 300 square foot room — you divide that by your home’s total square footage. Most people land in a 10 to 15% range. Theoretically, you could then write off 10 to 15% of home expenses like mortgage interest and property taxes. Though you’d already get most of that if you itemize. Utilities and repairs might add a little more. For most people, that’s a $2,000 to $3,000 expense at most, and it raises your audit risk. The corporate rent strategy, also called the Augusta rule, is based on an idea from Augusta, Georgia, home of the Masters golf tournament every year. Augusta is a wealthy town, and wealthy residents pushed through a useful tax strategy.
Because hotel space is limited during the tournament, homeowners rent out their houses for five to ten thousand dollars a night for about ten days. They wanted to make money on that without paying tax on it.
How John Briggs Sets Up the Augusta Rule Rent Strategy
John Briggs: In particular, tax law defines a rental property as one rented for more than 14 days. If you rent a property for fewer than 14 days, it isn’t considered a rental activity. That means any income from it isn’t rental income. Separately, large businesses regularly rent venues like hotels and convention centers for company meetings. Combine those two rules: set up a separate business entity, which rents your living space from you personally for one day a month. That’s 12 days a year, under the 14-day threshold. Your business gets a legitimate rent expense, the same kind most businesses claim anyway. When that money passes to you personally, you don’t have to report it as income anywhere. Nationwide, we’ve found that $1,250 is a reasonable standard day rate, in line with what a hotel would quote.
If you’re in a more expensive area, we recommend checking short-term rental listings for a comparable property to find a higher, defensible rate. At $1,250 a month, that’s $15,000 a year in rent expense. That could mean roughly $6,000 in tax savings, compared to a home office deduction that might raise your audit risk while saving you closer to $1,000. That’s why we like this strategy so much.
Handling Venmo, PayPal, and Electronic Client Payments
Steve Washuta: Ultimately, that’s amazing, combining two rules to create a benefit neither one offers on its own. We’ve covered some big fitness-industry red flags, but one thing I’ve noticed lately is how many people are accepting electronic payments. There’s Venmo, Zelle, and other apps. A lot of personal trainers use a non-business Venmo account under just their own name. A client finds them and sends payment directly. How do you help people avoid problems there, since I’d imagine the IRS is looking into this too?
John Briggs: In fact, they haven’t found a great solution yet. But if the IRS can identify that you have a Venmo or similar account, they’ll want reports on it. I understand why people avoid registering as a business on these apps. It usually comes with a fee, versus treating it as a transaction between friends that isn’t charged. If you’re doing that, please at least report the income. You could technically hide it, and the IRS would have a hard time tracing the transactions on their own. But if they do find it and you’ve hidden it, that constitutes fraud. It opens up far more years for them to audit. So just report it.
Venmo vs. PayPal vs. a Merchant Account
John Briggs: If you don’t want to pay for a business Venmo account, at minimum keep records. You may have to screenshot your year’s transactions, since I’m not aware of an easy way to export or email a full list. It’s a hassle, but you need documentation of what was client income versus personal money. The IRS can and will pull that data themselves if it comes to it. PayPal is a little more convenient, since you can export records and save them properly. I don’t have an issue with anyone taking payment this way for convenience. But depending on the size of your business, it’s worth considering how professional it looks. Accepting Venmo isn’t as polished as having a proper merchant account. You’ll pay two to three percent depending on your provider.
But that’s often worth it, especially since you can set clients up on a recurring payment instead of waiting for them to send a Venmo each time.
Where to Find John Briggs and Insight Tax
Steve Washuta: Interestingly, that’s a great point, and fantastic information as always, John. Point us toward your business for any personal trainers or health professionals who want to use your services or learn more about Insight Tax.
John Briggs: Notably, incitetax.com is the best place to start. It’s spelled a little differently, using the word “incite,” as in to incite a riot, since it technically means to cause to action. So it’s spelled I-N-C-I-T-E-T-A-X dot com. Check out our blog, where we go into more detail on everything we talked about today, including strategies like paying your kids. There are also a lot of free resources there for gym owners. If you’re interested in cash flow management, I also wrote a book. You can find details at ProfitFirstForMicroGyms.com. Both are great tools, and we try to give gym owners as many resources as possible.
Steve Washuta: As it turns out, thanks for joining us on the Trulyfit podcast. Please subscribe, rate, and review on your listening platform — we’d love to hear from you.
To that point, Social@Trulyfit.app
Overall, thanks again!
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If you want to see more insight on managing the financial and legal side of your fitness business, check out this blog: Pat Darby : Finance and Tax Talk.
