Tax breaks for a self employed hair stylist?

Question

I am a self employed hair stylist. I rent a chair in a salon from someone, and keep all the profits from clients. I pay taxes and social security, etc. throughout the year.

I had my taxes done professionally this year and the Tax Acct told me that I should set myself up as seperate company and get a payroll service to pay me. He said I could save $3000 per year in taxes this way. It would cost me abt $900 to get him to set this all up.

What do you guys think? Does this sound like a good idea?

Answer 1

Honestly this is probably something that you can do on your own. The majority of all businesses out there are self-employed people. Depending on where you stay, you should be able to do all of this yourself. I'm not sure how you are currently doing your taxes and what you are currently writing off a expenses. The first thing that I would do is see if the city that you live in has a business assistance center. They will be able to give you some information as to how you can do this by yourself. Some good sources of information is the irs website where you look that the self employement information and see what is recommended. You also check sites like turbo tax and h&r block and search there databases. I personally use turbo tax home and business software to prepare my taxes and it recommends and provides a lot of information about what you can and cannot deduct and gives you advice on what you can do to save you money.

Just remember to keep track of all of your expenses, like the rent you pay, expenses for supplies that you use, marketing tools, stuff like if you use your cell phone for business. Basically just research what you can and cannot deduct.

I don't understand why he would have a payroll service set you up to be paid by them if you are collecting money directly from you clients. You can probably do this yourself.

Answer 2

No, sounds like the tax accountant is off-base. You'd more likely end up paying MORE taxes total, if he's referring to incorporating. Your personal taxes could decrease, but you'd also be paying corporate taxes which would more than wipe out the savings on your personal taxes. Plus of course the couple hundred dollars a year for the tax service, and his $900 fee.

Answer 3

You don't need to pay $900 to set yourself up as a business. You don't need to complicate your life by setting yourself up as a corporation. It seems your tax accountant just wants more job from you :o)

Go to your local county clerk's office and register your business. If you want to use a name other than your given name (e.g. Petals Hair Salon) then you need to file a fictitious name or Doing Business As (DBA). At most, business registration as a sole proprietorship can only cost you $25-100 depending on your state's requirements. But definitely not $900 (that's overkill)

Then come tax time, all you need is to fill up Schedule C where you list all your business expenses and profits. You can then deduct your expenses from your income

Your accountant just wants to complicate your life -- and get more money from you

Answer 4

i'm no accountant but it seems like he's just trying to make a couple hundred extra bucks. in addition to the help you receive from the YA community, here's an article if you want to do some research. it explains the different business taxes:
http://www.irs.gov/businesses/small/article/0,,id=98966,00.html