By April L. McDaniel, CPA, CRSP
Owning a salon is a tough business. Right now salons are facing numerous challenges that vary from coast to coast. What can you do as an owner to face these challenges like the warriors that you are? Be a business person first! Successful salon owners read up on new laws and hire qualified professionals to make sure they are doing things right. Often times when we are reviewing tax returns & accounting for prospective clients we find costly errors. Unless you hire someone that knows your business you run the risk of missing out on deductions and making mistakes on things like automobile expensing, loans, business types, and the list goes on and on.
A really big problem right now is the non-reporting of tip income. The IRS completed a study in the fall of 2018 and found that $23 Billion dollars of tips are not being reported by the beauty, gaming and restaurant industries combined. This is a big deal. You can be sure that the IRS is watching. Don’t forget that IRS agents get their hair done. They know you get tips. Other than it just being the law and right thing to do why else should stylists report tips? It’s hard to get a loan to buy a car or house if your W2 or tax return doesn’t reflect all your earnings. Having cash in your pocket often supports bad spending habits. You’ll be able to monitor your spending more if it’s in the bank. And finally, following the law will help you sleep at night. It’s not a matter of if you’ll get audited it is a matter of when. In a recent webinar we covered the tax laws governing tips and the IRS tip program. Click on this link to download a copy of the webinar and handouts. Kopsa Otte Tip Webinar
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