How to Correctly File Taxes as a Hairstylist

Filing taxes as a hairstylist involves navigating specific income streams and deductible expenses, which differ significantly from traditional employment. Understanding these unique tax considerations is important for accurate reporting and compliance. This guide covers income reporting, expense deductions, and payment procedures for hairstylists, whether they operate as independent contractors or employees.

Understanding Your Income and Employment Status

Hairstylists often earn income through various methods, and recognizing each type is key for accurate tax reporting. Income can stem from direct client payments for services, commission earnings from a salon, or booth rental fees paid by clients directly to the stylist. Many hairstylists also generate income from product sales, either directly to clients or as a percentage of salon sales. Cash and credit card tips are also taxable income.

The employment status of a hairstylist significantly impacts how income is reported to the Internal Revenue Service (IRS). Hairstylists operating as independent contractors typically receive a Form 1099-NEC from salons or clients who paid them $600 or more during the year. For cash payments, all income must still be reported, even without a Form 1099-NEC. Conversely, hairstylists working as employees receive a Form W-2.

Independent contractors are considered self-employed and are responsible for paying their own self-employment taxes, which cover Social Security and Medicare contributions. This contrasts with employees, whose employers withhold these taxes from each paycheck. Properly classifying income and employment status dictates the specific tax forms required and overall tax liability. Accurate record-keeping of all income sources, regardless of the payment method or form received, is necessary.

Identifying Deductible Business Expenses

Self-employed hairstylists can deduct ordinary and necessary business expenses, which reduces their taxable income. Professional tools and equipment, such as shears, clippers, dryers, and styling irons, are deductible. Salon supplies like shampoos, conditioners, dyes, perming solutions, and other consumable products used in providing services are also deductible. Maintaining detailed records, including receipts, for all purchases is important.

Booth rent paid to a salon is a common deductible expense for many independent hairstylists. Professional liability insurance premiums, which protect against claims arising from services, are also deductible. Continuing education and training costs, including fees for workshops, seminars, and certifications that enhance professional skills, can be deducted. Marketing and advertising expenses, such as business cards, website maintenance, social media ads, or local print advertisements, are deductible.

Professional licenses and fees, including state board licenses or local business permits, are typically deductible business costs. If personal vehicles are used for business purposes, such as traveling between salons or to client homes, business mileage can be deducted using the standard mileage rate or actual expenses. Home office deductions may also be available if a specific area of the home is used exclusively and regularly for business activities, such as administrative tasks or product storage. This deduction allows for a portion of home-related expenses like rent, utilities, and insurance to be claimed.

Making Estimated Tax Payments

Self-employed hairstylists are required to make estimated tax payments throughout the year because no employer is withholding taxes from their income. This obligation applies if they expect to owe at least $1,000 in taxes for the year. Estimated taxes cover both income tax and self-employment tax, which funds Social Security and Medicare. The self-employment tax rate is 15.3%, consisting of 12.4% for Social Security and 2.9% for Medicare. This tax applies to 92.35% of net earnings from self-employment.

To calculate estimated tax payments, hairstylists must project their annual income and subtract their anticipated business deductions. The resulting net profit is then used to determine the self-employment tax and income tax liability. For the Social Security portion, there is an annual earnings limit, but the Medicare portion applies to all net earnings. Self-employed individuals can deduct one-half of their self-employment tax when calculating their adjusted gross income, which reduces their income tax burden.

Estimated tax payments are due quarterly. If a due date falls on a weekend or holiday, the deadline shifts to the next business day. Payments can be made electronically through IRS Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or via the IRS2Go app, or by mail with Form 1040-ES.

The payment due dates are:
April 15 for income earned January 1 to March 31
June 15 for income earned April 1 to May 31
September 15 for income earned June 1 to August 31
January 15 of the following year for income earned September 1 to December 31

Completing Your Tax Forms

Self-employed hairstylists use specific IRS forms to report their business income and expenses. The primary form for reporting business operations is Schedule C, which is filed with Form 1040. Schedule C is where all gross income from hairstyling services and product sales is reported, and where all eligible business expenses are itemized and deducted.

After deducting all allowable expenses on Schedule C, the form calculates the net profit or loss from the business. This net figure is then transferred directly to Form 1040, becoming part of the hairstylist’s total income. A net profit from Schedule C also triggers the requirement to calculate self-employment tax. This calculation is performed on Schedule SE.

Schedule SE determines the amount of Social Security and Medicare taxes owed by the self-employed individual. The net earnings from Schedule C are used as the basis for this calculation, with the self-employment tax being applied to 92.35% of those earnings. The resulting self-employment tax amount from Schedule SE is then reported on Form 1040, and one-half of this amount is deductible against the hairstylist’s gross income. These forms are interconnected, ensuring that business income, expenses, and self-employment taxes are accurately accounted for on the main individual income tax return.

Submitting Your Tax Return

Once all necessary tax forms are completed, hairstylists can proceed with submitting their return to the IRS. Electronic filing is the most common method and can be done through various tax software programs or with the assistance of a tax professional. E-filing offers faster processing of refunds and immediate confirmation of receipt. Alternatively, taxpayers can choose to mail a paper return directly to the IRS.

Any final tax payments due can be made electronically through IRS Direct Pay, via the IRS2Go mobile app, or through debit/credit card payments. Payments can also be mailed with the tax return or as a separate voucher. If a refund is due, it can be received via direct deposit into a bank account, which is typically the quickest method, or by paper check. After submission, it is advisable to retain copies of all filed forms and supporting documentation.