How to File 1099 Taxes As An Independent Spa or Salon Contractor

Tax season is officially underway and sometimes this can be overwhelming, especially if you’re an independent contractor. We can probably all agree…taxes are no fun, however, they are part of life as a business owner. There are so many things to take into account that can impact the way you file and how much money you may be entitled to (or expected to pay). You’ll need to file a tax return with the Internal Revenue Service (IRS) if your net earnings from self-employment are $400 or more. Along with your 1040 form, you’ll file a Schedule C to calculate your net income, also known as the loss for your business. You can file a Schedule C-EZ form if you have less than $5,000 in business expenses.

As a spa and salon professional, you know how to take care of your clients’ well-being — but you might need some help of your own when it comes to tax time. You’re essentially running your own business and acting like the employer and employee. So in the eyes of the IRS, you’re responsible for paying the full 15.3% self-employment tax. The good news? All year long, you’ve been investing in your business. Much of your business-related expenses are potentially deductible. Now is the time to turn business expenses into tax deductions.

In fact, all of our expert SpaSpace professionals are actually independent contractors, also known as 1099 employees. Members have complete control over their schedule, through our spa and salon booking software, and are able to choose when and how often they will accept appointments, as well as where they would like to work. Another benefit of working as a SpaSpace independent contractor, is the ability to create your own brand and experiment with marketing your services. Yet, SpaSpace does not withhold any taxes from the money paid to our 1099 employees, or withhold money associated with benefits provided to employees.

So we wanted to provide a complete guide to making 1099 taxes as easy as possible and to learn about the top tax deductions you may be eligible for—it just might save some dollars during tax time. Don’t worry, we’ve got your back! If you’re self-employed and feeling at all daunted by the upcoming tax season — fear not: we’ve got you covered at SpaSpace!

The Complete Guide to Spa and Salon Independent Contractor Taxes

Keep Your Receipts

Get organized and handle your accounting effortlessly! 

Before you begin the process of filing your business income tax return, you’ll need information on your income and expenses for the year. Prepare a profit-and-loss statement (also known as an "income statement"), and retain detailed records of expenses to support all of the deductions you want to take.

Throughout the year you should maintain copies of:

• Bank statements
• All invoices and receipts
• 1099-MISC forms
• Business balance sheets and ledgers
• Previous tax returns

We can’t emphasize enough: document all expenses. Estheticians and massage therapists should keep records and all receipts to make sure they are getting the most net income after taxes. It’s important to keep the actual receipt, as the IRS doesn’t consider your credit card statement charge to be adequate documentation. Many use business tax preparation software that walks you through the various sections of Schedule C, Schedule SE, and other schedules and forms. We recommend a filing system and spreadsheet that allows you to keep your expenses and receipts organized as you incur them throughout the year, to make compiling your tax information much easier.

Report All Tips

If you've started working as an independent spa contractor, you might be wondering: are tips taxable? The answer is yes — keep track of all income, including tips. Do not assume that you don't need to report tips. The IRS treats tips as taxable income. If you earn tips, then you're responsible for paying income tax on that tip money.

End Of Year Strategy

The end of the year isn’t just a time for personal reflection, but it’s also a good time to assess whether you can reduce your tax liability through deductions. It’s the perfect moment to consider charitable donations to nonprofit organizations or other business expenses that might be eligible as tax deductions.

Eligible Deductions

While being an independent contractor means you have to pay more in self-employment taxes, there is an upside: you can take business deductions. These business deductions reduce the amount of profit you pay income taxes on.

You’ll report these deductions along with your income on Schedule C.

There are a number of business deductions you can take as an independent contractor. In general, an expense is tax deductible if it meets three conditions established by the IRS:

• You incurred the expense in connection with your practice.
• The expense is ordinary (common or accepted as an expense of running a spa practice) and necessary (appropriate or helpful for developing and maintaining your practice).
• The deduction is based on precedent and on the reasonable belief that it is accurate.

Common Deductions

As previously mentioned, you’re allowed to deduct expenses that are reasonable and necessary for your job. 

For those in the beauty industry, this typically includes things like web hosting, marketing and advertising, equipment and electronics, office supplies or skincare/massage products used during services, travel related expenses, business mileage, business meals, insurance, uniforms, linens/cleaning services, utilities for office space, rent/mortgage payments, depreciation on fixed assets, continuing education, business conference fees, business books or references, license fees, payment processing fees, tax filing fees, etc.

The important thing when it comes to deducting expenses is to make sure you track them throughout the year.

Always Get Professional Help

Taxes shouldn't be overly taxing! A spa and salon contractor’s best friend can be a professional tax advisor.

Rules for what is allowable and not allowable as a tax deduction change almost every year. Penalties and interest for paying the wrong amount of taxes can cost much more than the fees you might spend to hire a professional tax advisor. SpaSpace highly encourages you to contact a tax advisor or small business consultant to learn more about opportunities available to self-employed workers and to guarantee a smooth and easy tax season.

We hope this information is helpful to you in understanding what you need for tax preparation this year. Don’t procrastinate getting your taxes done. We wish you the best of luck with your massage business and with your 2022 tax season!

Are you interested in learning more about becoming a SpaSpace professional? Learn more about our brand and contact us today!