Read This Before You File Your Taxes

Filing Your Taxes? Here’s 7 Things You Should Know

Tax season is one of the most stressful and confusing times a year for stylists and salon owners. There’s a lot of info out there that might not apply to you, making an already daunting process seem even more difficult. Salon owner Victor ValVerde (@victorval) and his accountant Loren Oesterle from Liberty Tax Service went live on Schwarzkopf Professional’s Insta to spill the real tea on the tax game.

W2 Vs. 1099

If you received a W-2 form, that means that you are an employee hired by your employer. The employer pays half of your Social Security, Medicare and other government taxes. Withholdings are taken from your paycheck during the year, so you have a return.

Receiving a 1099 form means that you’re self-employed. No taxes are withheld from your pay stub, but you’re are responsible for the employee and employer taxes owed to the IRS. The plus side is that you can write off a lot of things that a W-2 employee may not be able to, to help offset the cost.

Are You Classified Correctly?

Sometimes salon owners mistakenly W-2 employees as 1099 self-employed workers, which isn’t beneficial for stylists who have nothing to write-off. Salon owners, if you dictate the time your employees come in, what they can charge, what they do in the salon and provide supplies and hair tools, you have to treat them as a W-2 employee.

A 1099 stylist is a business within a business, because they come and go when they want, handle the clients they want to work with, set their own prices and handle their own expenses. Salon owners can get into serious trouble and fined if their state or the US Department Of Labor finds out about any misclassifications. 

Include Tips On Your Income Tax

You know your tips are subject to taxes, so you should be accurately reporting them anyway. If you’re not, not only can you get into trouble with the IRS—you’re actually setting yourself up for other issues long-term. Loren explained that if you want to buy a house or salon and you haven’t been reporting your true income, you may find that you don’t qualify for that loan. In the eyes of the bank and the IRS, you don’t make enough money to afford it. So be honest and report your actual income. More info on tip reporting can be found on the IRS website here.

Writing Off Your Daily Commute?

If you go to a place at least 35 times a year it’s considered commuting and is not a deductible expense, because everyone has to get to work. So no, you can’t write off your Lyft or Uber expenses unfortunately. 

If you’re a freelance stylist, you can however write-off traveling to a client’s location if you go less than 35 times a year. Just keep track of your traveling mileage and expenses from your main place of employment, whether it’s a salon or your home, to the customer’s location. You do need to keep track of the mileage used to know which miles were for business and which were for personal use. Before you file, take a ratio of the mileage used versus your travel expenses, like your car note or lease, gas, car maintenance, repairs, etc., to decide which one you should right off. 

Write-off Education & Hair Shows

Did you know you can write off any classes or hair shows you attend for business purposes? Especially if you’re self-employed. That means you can deduct any classes you watch on BTC University or The BTC Show! Make sure you keep track of what expenses are strictly for business when you’re traveling.

Organize Your Expenses

Loren recommends freelance stylists and salon owners get some type of accounting software, like Quickbooks, to keep track of their expenses. So at the end of the year everything is already organized and ready to go by tax season.  

RELATED: 103 Tax Write-Offs For Hairstylists