Salon Rent

[gman]

Salon owner recieves rent for chair. These are the only two beauticians there. I am preparing both returns and filing the 1099 from one to the other. Does the owner report the rent on Sch C or E?

thanks

[taxea]

If owner also works there it is permissible to report it as other income/rent on his C

[ChEAr$]

Salon owner recieves rent for chair. These are the only two beauticians there. I am preparing both returns and filing the 1099 from one to the other. Does the owner report the rent on Sch C or E?

thanks

the chair is personal property, thus schedule c.

The only 1099-misc required is from the renter to the owner.

[taxea]

the chair is personal property, thus schedule c.

The only 1099-misc required is from the renter to the owner.

I think that's what I said. Other income/rental on Sch C

[dsi]

gman, it's not rental income, it's sch C income subject to SE tax

[Jiggers]

Salon owner recieves rent for chair. These are the only two beauticians there. I am preparing both returns and filing the 1099 from one to the other. Does the owner report the rent on Sch C or E?

thanks

Think about it. The salon owner deducts all the utilities, insurance, maintenance, etc., and probably depreciation for the salon, including the chairs and equipment, on a Schedule C.

So wouldn't the income for the follow the expenses? Reported on Schedule C.

[Sabre]

Salon Employee

Make sure your owner is not handling any money for these operators or you will end up with an employee situation.

[taxea]

Make sure your owner is not handling any money for these operators or you will end up with an employee situation.

Not necessarily...this is sop with these types of businesses and accepted by the IRS. The "renter" of the stall/chair files a sch C. The owner and renter may have an agreement whereby the clients fees are collected by the business and by agreement the renter gets a % of the income. The owner may or may not provide supplies and equipment. The renter may purchase their own supplies and equipment which are expensed on the Sch C. Or it could be a combination of both. The renter gets a 1099 from the owner which is reported on the renter's Sch C along with tips.

This is a long-standing manner of doing business with tattoo shops, barbershops, hair salons and such type of businesses.

[Bees Knees]

This is a long-standing manner of doing business with tattoo shops, barbershops, hair salons and such type of businesses.

True, but it is not always cut and dry. TTB What's New for Tax Year 2011 and Beyond lists a court case that dealt with this very issue on page 82 (Cheryl Mayfield Therapy Center, T.C. Memo 2010-239).

The court looked at the common law employee factors and concluded there were factors that supported treating the workers as both employees and independent contractors.

Factors supporting employee status included:
• Services were integrated into the spa's operations, which booked appointments for the providers,
• Service providers provided services mostly on the spa's premises and did not make their services available to the general public outside of the spa,
• The spa provided some training,
• Clients paid the spa, which retained the payments, subtracted expenses and rent, and then distributed weekly checks to service providers.

Factors supporting independent contractor status included:
• Service providers paid for their work space, paid their own expenses, and bore the risk of loss.
• Service providers were compensated on a straight commission basis, with no minimum guarantee.
• Service providers could refuse any client and believed they had a nonemployee relationship with the spa,
• The spa did not control or tell the service providers how to provide their services to clients and did not control their schedules.

In the end, the court said it was close, but that the service providers were in fact independent contractors.

The point being, each case can be different, and the IRS will try to call the workers employees if the shop owner has any kind of control over the worker.