Workers in the hair and beauty industry face a unique set of challenges when it comes to taxes. Since a significant portion of the transactions involve cash, many hair stylists fail to report their full income. As a result, workers in this industry are often heavily scrutinized by the IRS-whether guilty or not.
Because of the problem of underreported income in the hair and beauty industry, the IRS has created special programs specifically aimed at finding hair stylists who don't report their full income. This includes everything from analyzing your appointment books to observing the amount of walk-in business you get. In short, the IRS takes whatever measures necessary to make certain you're paying your full share of taxes.
So, what can you do as a hair stylist to avoid trouble with the IRS? Here are a few tips that will save you a lot of unwanted stress.
1. Know Your Responsibilities- The hair and beauty industry is one of the most complex when it comes to classifying your tax responsibilities. It's difficult to determine if a hair stylist is simply an independent contractor or an actual employee of the shop. On top of that, there's the issue of how to report tips. Not to mention, there is often commission from selling products at the salon. Understanding what all of this means is crucial to avoiding trouble with the IRS.
2. Keep Detailed Records- If the IRS comes knocking at your door, you don't want to be caught unprepared. For this reason, you need to keep detailed records of all income, tips, commission, rent paid for your space, and anything else involving your income as a hair stylist. The more documentation you have on your side, the likelier it is that you'll be free from any wrongdoing. A little record keeping goes a long way to avoiding a lot of trouble.
3. Get Tax Help- Because IRS audits for hair stylists are so common, the best thing you can do is seek professional help. Tax resolution specialists have a detailed understanding of your situation, and they can clearly explain what you need to do to track and file your taxes properly. Think of it as an investment. Spending a little time with a professional now will save you time, money, and stress later.