February 24, 2019
A professional hair stylist or barber 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. If the stylist rents a booth in a hair salon, or is self-employed, then they file taxes differently. When taxes are withheld from wages, the employee files taxes based on income found on a W-2 form. Self-employed individuals, however, submit tax documentation as a business owner. When business owners prepare 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-Employed 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 Microsoft Excel, is ideal for maintaining this information.
Self-employed stylists also need to maintain records related to expenses such as supplies, booth rentals, and business cards. These records show the stylist the total amount of expenses they will deduct from their income at tax time. Any expenditure related to styling is tax deductible. They can also deduct the cost of a cell phone if it’s used as a contact method for clients.
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. They will 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 are required.
If the stylist has 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.
Form 1040 is used to list all deductions, including dependents. If the stylist qualifies 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.
The cost of business expenditures can be deducted, while preparing for 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 the submission of 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. The cost of expenditures related to running the booth or business may also be deducted when filing.
Tax Preparation for Hourly Hair Stylists
All hourly hair stylists fill out either tax form 1040 or 1040EZ. The correct form depends on filing status. For instance, if a stylist plans to claim dependents, it is best to use form 1040. When filing taxes, utilize the information shown on the W-2 received by the employer.
How Can Avalon Help?
Avalon is a full service beauty college providing career training for aspiring hair stylists and beauty professionals. We offer training, which includes the business end of the industry. Contact us for more information and get started on building your dream career or starting your own business!