Help! My wife is a hair sytlist and she is getting killed on taxes! 19k on paper says she ows 4k??

Question

My wife is a hair stylist and recieved her 1099 MISC. as an independant contractor. I entered the info into turbo tax, and it sayed she owed 4,000.00, (without any deductions). She only made 19K. Is this accurate? and is the only way to lower what she owes to make deductions?
I make 44K a year and If I filed separtly I could get back 2k after deducting my house...hardly seems fair please help what can I do!

Answer 1

If she worked as an independant, then she should have expenses that she would be able to report on the Sch C that would reduce her income, She will probably still owe due to her having to also complete the Sch SE for her self employment taxes (SS and medicare)

As the above answerer said, any supplies that she had to purchase, would be considered business expenses, if she had to pay for chair rental in the shop that too could be included. Rollers, curling irons, blowdryers, brushes, combs, clippers , scissors, if she had to purchase her own colorants or perm solutions, those too are expenses, she needs to keep receipts for all of her purchases thru the year. and she should start making estimated tax payments thru the year to avoid being hit with a large tax bill at the end of the year


http://www.irs.gov/businesses/small/index.html

Answer 2

Almost $3000 of that $4000 is self-employment tax, because the income was 1099. If she'd been an employee, half of that would have been deducted through the year from her paychecks - the employer would have paid the other half. That's one of the downsides of working independently rather than as an employee - you have to pay both halves of social security and medicare taxes.

You say you figured it without any deductions - there are most likely some that can be taken. If she pays a chair rental, or some other payment for space in the shop she works in, that would be deductible - also any supplies. That would reduce her net income, and therefore reduce her self-employment tax.

I'm more than a little surprised that, if you're planning to file separately, the income tax on $19,000 wasn't more, unless she took any dependents and itemized expenses that you have together.

Filing separately is almost surely a bad idea, and will result in more taxes overall for the two of you than filing a joint return would.

The reason the tax on her income is so high is the self-employment tax - and that's only because she didn't pay it through the year, like you did if you work as an employee and get a W-2. On $44K you'd have paid $3366, and your employer would have matched that - you have to take that into account before thinking that her income is being unfairly taxed.

Answer 3

It's fairly for someone to overlook the self-employment tax aspect of earning and reporting income as an independent contractor. Bostonia correctly pegged the issue--her income is subject to two different taxes, income tax and self-employment (SE) taxes. The SE taxes are equivalent to what she would have had withheld if she paid as an employee, except that she is now her own employer and must pay the employer's share as well. She does get a deduction for 1/2 of the SE tax calculated on Schedule SE, which is 15.3% of 92.35% of her self-employemnt earnings. She should look for legitimate business expenses, such as her tools, consumable items for which she is responsible, car mileage if she is not commuting to a standard location, etc.

You cannot compare her total tax liability (which includes both income tax and SE tax) to your income tax only on your earnings as an employee. You also cannot compare what her liability is (before she makes any payments toward that liability) with your refund (which is your liability less payments made toward it).

Yes, Turbo Tax is likely giving you the right answers. Look at the forms, and verify that self-employment tax is being calculated on Schedule SE, and added into total tax on the Form 1040 version she is using. Consider filng jointly, unless you have spousal issues with finances that require you to keep everything separately.

Answer 4

On self-employment income you have to pay 15.3% in FICA (social security) taxes; plus your federal and state income tax. If she is a hair stylist is she keeping track of all her expenses? Does she pay chair or booth rental? Does she buy any supplies or hand tools? Does she haul tools and supplies back and forth to a work site at 44 1/2 cents a mile? Does she have to buy a license to be stylist? Does she study or take courses and spend money to keep her skills updated? You should fill out a schedule C and put down all her expenses and reduce the gross income by same. Only her net (remaining) income is subject to tax; not the gross.

Answer 5

She has to pay 15.3% for Self Employment taxes. That will be over $2,900 for that alone, and there is no way around that if she has no other business expenses to reduce her gross income.

What you'd get back on a separate return is meaningless. You should file a joint return to get the lowest possible tax liability.

With that much tax liability being generated by her income she should be making quarterly estimated tax payments using Form 1040ES. If she's not been doing that you may be looking at penalties for underpayment of tax.

Answer 6

Turbo Tax is accurate. You need to fill out Schedule C and take all available deductions. That is the only way to lower the amount that is taxable.

She needs to send in quarterly estimated taxes starting now so you will not be in the same situation next year. Also, she needs to keep track of all her expenses.

Answer 7

you should have your wife file a schedule C that way she can write off expenses. some expenses are like advertising, supplies, use of the car and lots more. you want to bring her expenses up so that her income goes down and her taxes due will get lowered. you should file together and with a business. this way may be best

Answer 8

Check your entries, that doesnt sound right at all. If she only makes 19,000 a year, she would have to pay very little, if any taxes - she should really get money back - even filing jointly. BUT - has she paid taxes all along this year on her earnings? if not, then yes she owes....

Answer 9

If she bought a pair of scissors, combs, hair gel, write it off.