Know your status
SHOP
OWNER
You own your physical location where you operate and offer barbering services. You may choose to run your business as a sole proprietor, partnership, or corporation. You may have employees who work for you, or you may decide to hire contractors to rent their booth.
EMPLOYED
BARBER
You work at a barbershop where you are paid a wage either on an hourly or salary basis. Your shop owner determines how the shop and your business operate.
CONTRACTED BARBER
You work at a barbershop where you are employed as a contractor and operate your own independent business. You rent booth space from the shop owner on an agreed-upon rate & schedule.
Consider your tax situation
SHOP
OWNER
As an employer, federal law requires you to withhold taxes form your employees’ paychecks. Depending on the wages, you must take out of your employees’ paychecks certain amounts for Federal Income Tax, Social Security Tax, and Medicare Tax. You must then pay any liability for the employer’s share of Social Security and Medicare Taxes. This portion, your share, is not withheld from employees. You may also be required to pay unemployment (FUTA) taxes on these wages.
In addition to reporting all taxable income on the appropriate income tax form, you would also have the responsibility for issuing Form W-2, Wage and Tax Statement.
EMPLOYED
BARBER
If you’re an employee, your employer will withhold taxes from each paycheck. Beginning in 2018, employees are no longer able to deduct their unreimbursed employee expenses on their taxes.
You’ll file your individual tax return with the information provided on the w-2 your shop owner or employer sends.
CONTRACTED BARBER
As a booth renter, or independent contractor, you may need to make estimated tax payments during the year to cover your tax liabilities. This is because as a booth renter (independent contractor), the business does not withhold taxes from your pay.
Estimated tax is the method used to pay tax on income that is not subject to withholding, such as earnings from self-employment you receive as a booth renter. Estimated tax payments are made each quarter using Form 1040-ES, Estimated Tax for Individuals.
Do I need to file?
The general income rules from the IRS require filing a tax return if your income exceeds the following thresholds for 2022:
Single, under 65—$12,550
Single, 65 or older—$14,250
Married filing jointly, both spouses under 65—$25,100
Married filing jointly, one spouse 65 or older—$26,450
Married filing jointly, both spouses 65 or older—$267,800
Married filing separately, any age—$5
Head of household, under 65—$18,800
Head of household, 65 or older—$20,500
Qualifying widow(er) with dependent child, under 65—$25,100
Qualifying widow(er) with dependent child, 65 or older—$26,450
What taxes do I owe?
SHOP
OWNER
Employees’ Federal Income Tax, Social Security Tax, and Medicare Tax. You must then pay any liability for the employer’s share of Social Security and Medicare Taxes.
EMPLOYED
BARBER
Your share of state and federal taxes. Your employer will provide you with a W-2 detailing your income.
CONTRACTED BARBER
Your federal tax responsibilities would be limited to reporting your income earned and expenses. For example, a sole proprietorship would file Form 1040, using Schedule C to report business income and expenses and Schedule SE to report Self-Employment tax.
When do I file?
Below are the major dates for the 2023 tax season, along with other dates you need to be aware of to file your 2022 tax return. Typically barbers or businesses you classify as self-employed are required to file your taxes quarterly. This means you’ll need to estimate how how much to pay the IRS every 3 months based on how much you’ll think you’ll earn in the same year.
Paying quarterly can reduce your overall tax bill be eliminating any costing late fees. Filing your taxes on a quarterly basis can cut 7% of tax liability at the end of the year. This way, you may get a refund from Uncle Sam the end of the year versus owing the IRS.
What to file?
SHOP
OWNER
• VIEW 1065 FORM
• VIEW 1040 FORM
• VIEW SCHEDULE C FORM
EMPLOYED
BARBER
• VIEW 1040-EZ FORM
CONTRACTED BARBER
• VIEW 1065 FORM
• VIEW 1040-EZ FORM
• VIEW SCHEDULE C FORM
Components of tax return
REVENUE
Gross Income: When filing you should report all the income generated from your primary service of barbering and or any product sales as well. You can request an estimated annual report from us at theCut. We’ll tally up your bookings through the platform and make it easy for you to prepare your return. Reach out to support@thecut.co to request your report.
Tips: If any tips received in the normal course of your business must be reported in your gross receipts, and reported on the appropriate income tax form.
EXPENSES
You work at a barbershop where you are paid a wage either on an hourly or salary basis. Your shop owner determines how the shop and your business operate.
Include any money you spent to operate your barbering business throughout the year. The cost of clippers, neck strips, gas traveling to clients, money spent attending an expo or barber battle. Properly categorize your expenses so you’ll be able to deduct them when filing.
DECUCTIONS
As a barber or 1099 contractor, the IRS gives you the ability to deduct all regular or business critical expenses when you file your taxes. All that really means is that come tax season, you’re able to deduct the expenses that any other barber or entrepreneur would need to run their business. Keeping an accurate record of all of your costs throughout the year will save yourself a lot of time and money come April.
Not sure of what all can be considered, “business critical”? Below is a short list of ideas to get your started.
Deductions for barbers
