Cosmetologists provide a wide range of services to their clients, including treating the skin, hair and nails. According to the U.S. Department of Labor's Bureau of Labor Statistics, approximately half of the cosmetologists in the U.S. are employed in spas or beauty salons, while the other half are self-employed as of 2010. The method that cosmetologists must use to file their taxes depends solely on the type of payment. If you're paid a paycheck and your client withholds income taxes and controls your work environment, you are considered an employee; however, if your client does not withhold income taxes and you can control the work environment, you're a self-employed taxpayer.
Employee
Video of the Day
Step 1
Gather your income records and tax forms. If you're an employee, you will receive Form W-2 from your employer at the end of the year. To file income taxes, you must use Form 1040-EZ, Form 1040A or Form 1040, depending on your financial situation. For more information on which form is appropriate for you, refer to the IRS Tax Topic 352.
Video of the Day
Step 2
Gather your expense records. As an employee, you can deduct any unreimbursed expense that is necessary or helpful for conducting business in your trade if you decide to itemize your deductions. Examples of qualifying unreimbursed employee expenses for a cosmetologist include hair supplies, uniforms and manicure utensils.
Step 3
Prepare your income taxes using Form 1040-EZ, 1040A or 1040. Report all income listed on Form W-2 in the Income section of the form. If you opt to itemize your deductions, you must use Form 1040 and Schedule A.
Self-Employed
Step 1
Gather your income records and tax forms. All clients that paid you more than $600 should send you Form 1099-MISC at the end of the year. For all other income, gather your bank statements or any financial records that provide information on income earned throughout the year. To file your income taxes as a self-employed taxpayer, you must use Form 1040.
Step 2
Gather your expense records. As a self-employed taxpayer, you can deduct any expense incurred while you earned self-employed income. Examples of expenses that you can claim include utilities, office equipment, rent, insurance, and license fees. If you operate a cosmetology business out of your home, you can also deduct some of your home expenses. For more information, refer to IRS Publication 587.
Step 3
Prepare your income taxes using Form 1040. Use Schedule C to report your self-employed income and expenses. Because a self-employed cosmetologist does not have an employee to withhold and pay Social Security and Medicare taxes, self-employed taxpayers must also prepare Schedule SE to determine the tax. The Social Security and Medicare tax for a self-employed taxpayer is called the Self-Employment tax.
Tip
If you are an employee and self-employed, you must file Form 1040 as a self-employed taxpayer. Report the income on Form W-2 in the Income section of the form and all self-employed income on Schedule C.