Why Don T You Tip The Owner Of A Salon Tax Tips For Self-Employed Barbers And Hair Stylists

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Tax Tips For Self-Employed Barbers And Hair Stylists

No matter how good your tax professional is, if you don’t provide all the necessary information and figures, your return will be incorrect. And any tax returns that are filed incorrectly will not be audited.

Undocumented cash receipts, inventory errors, overlooked deductions, and missed benefits are common in this industry. Some of these mistakes will increase your federal tax bill; others will change your future. Self-employed people can take advantage of the same IRS rules used by large corporations, allowing them to reduce their tax bill without cheating.

The following tips will help self-employed hair care professionals survive an audit.

Tax Advice 1 – Without a receipt, you will always fail an IRS audit. You will almost always survive an audit if you have a paper trail of every expense and every income. Tax returns must be kept for at least 10 years and tax receipts for at least 6 years.

Tax Advice 2 – Anything purchased or created for resale is considered inventory by the IRS. Inventory costs can only be deducted when the inventory is sold.

Products used at customers are never considered inventory, allowing the business to immediately deduct all shipping costs. However, many stylists supplement their income by selling hair products or other merchandise to their clients. Knowing how to track inventory will keep non-deductible inventory costs to a minimum and make it easier to pass an IRS inventory audit.

Tax Advice 3 – Unclaimed deductions mean you put less money in your pocket and pay a lot more in taxes. Although you create a paper trail every time you use your debit card, credit card, or write a check, it’s not easy to keep track at tax time.

And after three years, when you have to submit your receipt for an audit, trying to trace the paper trail will be nearly impossible. Since your business is small, it’s easier, faster, and you’ll always have everything you need to fight an audit if you’re called upon to explain your deductions to the IRS.

Tax Advice 4 – Anyone who does not follow the IRS laws will lose their tax deductions. Tax laws change every year, sometimes offering big savings in a short amount of time. Even if you do your own taxes, it’s a good idea to talk to a tax professional from time to time to keep up with new tax deductions and planning options.

The preparation of tax returns begins on January 1 for an independent entrepreneur with a profit. Getting started early is a good way to increase your chances of surviving an audit. Learning how the IRS views your self-employment income industry will show you how easy it is to minimize your tax bill while growing your business.

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