April 4, 2013
A professional hair stylist files taxes in two ways. If the stylist is employed by a hair studio, which pays them an hourly wage, then the company withholds taxes. A stylist who rents a booth within a hair salon or is self-employed files taxes differently. When taxes are withheld from wages, the employee files taxes based on income found on a W-2. Self-employed individuals, however, submit tax documentation as a business owner. When preparing their taxes they provide information found on the documents listed on the following checklist.
Tax Filing Checklist for Hair Stylists
- W-9, 1099, or complete record of annual income
- Deductions for business (expenses or other costs)
- Documentation for dependents (Social Security Cards and Driver’s Licenses)
- Form 1040
- Schedule C and Schedule SE, if self-employed
- Copies of Quarterly Tax Payment Vouchers
Tax Preparation for Self-Employment Hair Stylists
Hair stylists are required to keep thorough records of earnings, since some companies do not provide 1099s. These records include cash payments, checks, and credit card charges for services. Simplistic accounting software such as Excel is idyllic for maintaining this information.
Self-employed hairstylists also need to maintain records related to expenses such as supplies, booth rentals, and business cards. Any expenditure related to hair styling is tax deductible. You can also deduct the cost of your cell phone if it’s used as a contact method for clients. These records show the stylist the total amount of expenses they will deduct from their income at tax time.
Quarterly tax payments for state, federal, social security, and Medicare enable the stylist to maintain records. These vouchers are submitted to the IRS in April, June, and September based on income earned within those quarters. In the plus category, any overpayment of taxes is typically returned through a refund at the end of the year.
Tax Process for Self-Employed Hair Stylists
At tax time, a self-employed stylist can utilize tax form 1040 to complete his or her taxes. You’ll also be required to complete Schedule C to determine whether income earning during the year is considered a profit or loss. Then Schedule SE is completed to determine the amount of self-employment taxes that is required.
If you have submitted quarterly tax payments, these amounts are deducted from the required tax amount for the total yearly income. Professional stylists who have refrained from submitting early tax anticipation payments are required to send the full amount of self-employment taxes.
On the form 1040, you’ll list all deductions, including dependents. If you qualify for earned income credit, it is possible for the refund amount to cover self-employment taxes. Stylists who are 25 years old or younger may qualify themselves for earned income credit and lower self-employment tax amounts.
You can deduct the cost of expenditures for your business, while preparing your federal income taxes. The tax form 1040 offers stylists an option to list these expenses as a total amount. Although the IRS does not require you to submit receipts for these costs, it is beneficial to the stylist to keep these records in the event of an audit.
Additionally, the stylist is required to file a state tax return based on local income tax laws. Self-employed stylists are also required to pay taxes related to this filing status based on state guidelines and tables. You may additionally deduct the cost of expenditures related to running your booth or business when filing.
Tax Preparation for Hourly Hair Stylists
All hourly hair stylists fill out either tax form 1040 or 1040EZ. The one you choose to fill out depends on your filing status. For instance, if you plan to claim dependents, it is best to use form 1040. When filing taxes, you can utilize the information shown on the W-2 received by your employer.
How Can Avalon Help?
Avalon is a full service college providing career training for aspiring hair stylists. We offer complete training to you, which includes the business end of the industry. Our business training program is aimed to equip our students with the skills required to manage a beauty salon. Contact us for more information and get started on building your dream career or starting your own business!