Filing Your Taxes as a Solo Esthetician
Well, guys and gals, it’s that time again. Right now, if you’re not scrambling to get your business deductibles in order to give your accountant, what are you doing?
Filing taxes as a solo esthetician aka business owner, or even as a 1099C, is incredibly important for several reasons.
First of all, it’s a legal requirement. As a self-employed individual, you're required by law to report your income and pay taxes on it. Failure to do so can result in penalties, fines, or legal action by tax authorities. HOPEFULLY, you’ve been saving every month. As a small business owner making under $300,000, I would recommend you save about 20%-23% of your income in anticipation of paying your taxes at the end of the year. If no one told you that you basically owe Uncle Sam 20% of your income and your head exploded just now reading this, I’m sorry. As a business owner and/or 1099, you’re responsible for paying your own taxes as no one is taking them out of your paychecks for you, right?
“Well, I’ll just work under the table and have my client’s pay cash.”
Cool. You can do that, certainly plenty do, but now go try to buy a house, or get financed for a car, or go lease an apartment. You have no tax trail therefore no proven income. You have to let Uncle Sam in on the goodies in order to be functioning adult in society. It sucks, but it’s true. Also, how big do you want to grow? Maybe one day you need an equipment loan to buy that HydraFacial machine you’ve always wanted. Maybe you want that great hydraulic table that goes up and down like you’re floating on a cloud… loans require proof of income and as a business owner, your tax return is often what they need to prove you’re a viable and stable business owner.
Maybe you missed the boat this year - lesson learned. You’ll have to do your taxes anyway and possibly take a hit, but how do you avoid this last-minute scramble next year? Well, I advise all my graduates to keep track of their expenses and income throughout the year… aaaaand put aside at least 20% of your profits for the month. Put all that dough in a savings account that you don’t see and don’t have easy access to. Forget it exists. At the end of the year, you’re going to compile all your business information and find an accountant who works with small businesses. They’ll file and tell you how much you owe. Sometimes that savings ends up being an end of year bonus because after all your deductions you don’t owe as much as you saved…. YAY! DISNEYLAND HERE WE COME!
Question one: How do we track our income? That’s easy, you should be using a booking software. It’s as easy as that. Every month you can print out a sales total report and figure out what you brought in. Some of the more popular ones are square, glossgenius, and vagaro, but there are plenty others.
Question two: How do we track our expenses? This part is up to you. I’m an old fashioned gal. I like my spreadsheets. How younger, smarter folk do it these days is by using quickbooks. You can hook it up to you bank account and with a few clicks, manage how your expenses are being tracked. Ba-da-bing, ba-da-boom.
Questions three: What can I expense as a business owner? Well, a lot! Here are some of the basics, but you can always ask your accountant to give you a list.
Here’s a great list from lendingtree.com that I really love. To break down their list:
Startup Expenses (paint, furniture, lighting, labor to install lighting, wallpaper, decorations, tables, equipment, so on… whatever it takes to get you up and running as a startup, write it off!)
Business and office supplies (pens, pencils, printer paper, water for clients, ink for printer, paperclips, staples, tape, so on…)
Software/electronics/online apps (computer/ipad, your booking software, phone)
Domain registration/web hosting (We’re going to talk about this later, it’s great your booking app has a booking website for you, but it’s not enough. You need a searchable and performing website)
Home office deduction (If you work from home, write it off! You can claim part of your mortgage, home computer, and/or internet if you’re working from home)
Business property rent (We pay SO much in rent - write that off!)
Depreciation on equipment/machinery (keep track of what machines you purchase because you can write off their yearly depreciation)
Utilities, phone, internet (all of these are necessary to run a business and oooooh boy do they add up)
Cleaning services/supplies (YES! You can write off your cleaning services)
Repairs/maintenance (Repairs happen, track that)
Security system (which we should all have…)
Vehicle expenses (if you use yours for business only - slap a vinyl sticker on your car with your business information and call that advertisement. Just remember not to drive like a jerk)
Employee salaries and contracted labor expenses (If you venture down that road where someone is working for you or under you, we get to write that off)
Business meals and entertainment
Professional services and fees (attorney, accountant)
Interest and bank fee’s (All your credit card processing fee’s get to be written off)
Licenses/taxes (your salon license, your professional license, any inspections or annual licenses)
Bad debt (Someone runs out without paying?)
Business insurance (We definitely need this, and yes, it’s deductible)
COGS (retail - what you spend. If you spent $300 you retail it for $600… well you get to write off the $300. COGS stand for “cost of goods sold”)
Travel expenses (Yay! Trade shows here we come)
Advertising/marketing (everything from IG ads to your menu’s and business cards)
Shipping costs and postage (shipping items to clients, write it off)
Memberships/subscriptions (Canva, microsoft office suites, booking apps)
Education/training (any and all advanced training, write it off)
Moving expenses (this is great)
Charitable contributions (any discounts or giveaways, I write that off, but certainly anything donated for charity gets a write off as well)
Lots of good stuff in there, so make sure you’re tracking alllllll your spending. And, on the topic of tracking spending, remember to have a separate bank account for your business and pay yourself like an employee. Don’t use your personal bank account.
Good luck, Estie-Entrepreneurs out there… God Speed! May your incomes be great, and your deductibles be enough to not have to pay Uncle Sam an arm and a leg. Bye for now! PS-let me know when we’re going to Disney.