Ask an Accountant: Free Tax Advice for Hair Stylists & Salon Owners

Small business taxes are not why you became a business owner, but hey. 

And luckily, we have just the right tax mentor to help you get through the most ~taxing~ day in April.

Bryanna Barrow is a licensed cosmetologist who got a degree in accounting after being asked so many questions about finances from her colleagues.

Deductions, Tax Forms & Filing Software for Hair Professionals

Should a sole proprietor do the standard deduction or list out all deductions?

“The good news is that you can do both!” 

Bryanna says, “The standard deduction has everything to do with the overall individual tax return.

[When you list out] all of your deductions, which also means listing out all your business expenses that your business is eligible for, it has everything to do with the business side of your tax return. 

Make sure you have a very knowledgeable tax preparer this season who is familiar with the salon industry, so they can guide you in the right direction.”

How should you organize your tax deductions/write-offs?

“When you are putting together all the expenses you had throughout the year for your beauty business, you need to be putting them into categories.”

• Advertising and marketing 
• Rent 
• Supplies 
• Repairs 

“It doesn’t matter if you’re a sole proprietor, LLC, or S-corp, you can still use those categories.”

If we buy wholesale products and use them for personal reasons, do we pay sales tax?

“I hate to break it to you…

But yes, you need to pay the sales tax.

Mic drop. 

Essentially:

1. You buy a product from a wholesaler.
2. You sell it to your clients.
3. Your clients pay sales tax on that product. 
4. You collect the sales tax.
5. You pay that sales tax to your county or state. 

If you’re using the product for personal reasons (and not selling to a client, who would normally pay the sales tax), you need to pay sales tax at tax time.

Are there any expenses that we may be unaware of but can write off as hair stylists?

Bryanna lists the most common write-offs to include:

• Education, like any class or workshop that you paid to attend
• Payment processing fees: “Don’t forget those processing fees, because you pay $1,000s each year in those fees.”
• Cell phone expenses, including a percentage of data usage 
• Business subscriptions, including any music streaming service that you use in the salon or your scheduling software, like Vagaro 

What advice do you have about tax deductions for a hairdresser?

“Do not listen to the internet!”

Bryanna says, “When it comes to tax deductions, you might not do the same things as someone else. 

Let’s say your salon is not run like that luxury salon. 

That means you cannot write off high-ticket things, because it’s not necessary or ordinary for your business.”

It sounds like basic financial advice, but Bryanna swears by it.

“The reason why most salon owners get so overwhelmed at tax time is because they are not organized. 

They don’t know how much they brought in, and they don’t know where they spent their money.”

If you want to know how successful your business is, track everything. 

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Tax Forms: 1099s, W9s & More

“A 1099 worker is essentially a business owner. It’s the same exact thing!

If you are not a W2 employee, then you are your own business.”

Bryanna says 1099 workers have to operate like salon owners:

• Reporting all your income 
• Reporting all your business expenses 
• Filing your tax return on time 
• Making quarterly estimated payments 

What’s a quarterly estimated payment?

“If you’re predicted to owe over $1,000 at tax time, then you should be making quarterly estimated tax payments.

[By doing this], at tax time, you should owe little to nothing, because you would’ve paid it already” throughout the year.

Does Venmo give contractors a 1099, or do we need to give them a W9?

“The answer is Venmo may give them a 1099. It just depends on how much money they generated throughout the year.”

However, whether Venmo gives contractors a 1099 or not, “it’s still [the contractor’s] responsibility as a 1099 worker…to report all of their income, all their expenses, and fill out their tax return” because “they’re actually their own business.”

“If you, as a salon owner, pay anyone over $600 a year, then you are responsible for providing the 1099 by [the deadline].”

Bryanna’s advice?

“Give them a W9 to fill out. 

This is going to give you, as a salon owner, all the information that you need to gather from them to put on that 1099.”

For a self-employed hairdresser, do you have any advice for tax prep?

Most salon owners don’t do this one basic thing… 

“You have to know your numbers.

Make sure you’re tracking what comes in and what goes out: all of your income and every single business expense.” 

According to Bryanna, this information can:

• Prepare you for tax time 
• Ensure you don’t overpay in taxes to the IRS or your state
• Help you pay yourself fairly 
• Aid in strategizing when to give yourself a raise 
• Track the financial health of your hair business
• Determine what’s working for your business – and what’s not

What should I do if I can’t file my tax return on time?

Bryanna suggests that even if it’s a month away from tax time, if you’re unsure whether or not you will file your taxes on time, it’s a good idea to file an extension.

An extension gives you six more months to file your tax return. 

But… 

“Make no mistake. Extensions don’t give you permission to wait six months to pay what is due. You need to pay what is due by the tax deadline. 

If you don’t, you could get a letter from Uncle Sam and your state letting you know you have some penalties because you didn’t meet that deadline.”

Tax Software

Vagaro is awesome at making sure that you have a platform to book your clients [and] provide your products.

On the other hand, your bank account collects all of your expenses.

You need a place where you’re able to take the information from Vagaro along with the information from your bank account, and track that every single month.

Bryanna’s recommendation for tax tracking software? 

Bonus! Is there free tax filing software?

Yep, and it comes from the IRS.

According to their site, “Direct File is a new option for eligible people in 12 pilot states to file your taxes online, for free, directly with the IRS.”

You can use this new tax software if:

• You live in AZ, CA, FL, MA, NV, NH, NY, SD, TN, TX, WA or WY
• You “have simple tax filing needs and report certain types of income, credits, and deductions”

In addition to Direct File, the IRS offers Free File:

• If you make less than $79,000 annually for Adjusted Gross Income, you can use the Guided Tax Software.
• If you make more than $79,000 in AGI, you can use Free File Fillable Forms.

Be sure to check out all the eligibility requirements before signing up for either of these free tax software programs. 

Vagaro's Ultimate List of Tax Prep Resources for Small Business Owners