Salon's Stylist, Employees or IC?

[AZ-Tax]

Salon owner wants to pay their Stylist's as "Indepdent Contractors". Not base salary plus commissions. Listening to the owner and based on the quesions on the EA exam, i woud have to say the Stylists and owner relationship leans towards "employee" relationship. Does anyone have a client with a similar situation? Another thread similar to this was started at: http://forum.thetaxbook.com/showthre...ght=Hair+Salon
The difference I see between that thread and my situation is my salon owner will pay a % of the fee generated by the Stylist to the Sylist. The salon owner will NOT charge the Stylist to rent the chair.

[taxmandan]

State labor law rules

Take a look at your state laws on classification, in my state that trumps federal law and the Employment Dept has been aggressive about reclassifying ICs as employees for hair salons. Things they consider: Who sets the appointments, does the salon owner set the hours of work, does the stylist set their own prices or is there a set rate for all? How the salon owner is paid doesn't even matter to them.
It has been suggested that a stylist could be an employee under state law and an IC for federal purposes, but really, who wants to maintain separate accounting information for dual statuses?

[ChEAr$]

Salon owner wants to pay their Stylist's as "Indepdent Contractors". Not base salary plus commissions. Listening to the owner and based on the quesions on the EA exam, i woud have to say the Stylists and owner relationship leans towards "employee" relationship. Does anyone have a client with a similar situation? Another thread similar to this was started at: http://forum.thetaxbook.com/showthre...ght=Hair+Salon
The difference I see between that thread and my situation is my salon owner will pay a % of the fee generated by the Stylist to the Sylist. The salon owner will NOT charge the Stylist to rent the chair.

There is guidance from IRS on this in the form of what used to be called MSSP, IOW an audit guide for examiners. Visit irs.gov and poke around a bit.

Howsomeever.......l. since the owner will NOT charge stylists to rent the booths/chairs, you're completely right; it's a common law employment situation.

[AZ-Tax]

Checklist of Employee vs Independent Contractor websites

I located this checklist via a yahoo search.

http://www.webster.edu/about/policy/independent_contractor_checklist.pdf

http://classweb.gmu.edu/jkozlows/tax2.htm

[ChEAr$]

it would be better to find a "checklist" , or rather what constitutes common law employment.

[taxmom34]

I only had one client who was hair stylist and she became an independent contractor when her employer decided to rent out all chairs. she set her own hours, and days off, as well as traveling to boston to get her supplies and she set her own prices. she filed as schedule C and SE

[ChEAr$]

I only had one client who was hair stylist and she became an independent contractor when her employer decided to rent out all chairs. she set her own hours, and days off, as well as traveling to boston to get her supplies and she set her own prices. she filed as schedule C and SE

Thus the chair rentor was not an independent contractor. Let's be clear about that. She was actually in business for herself and would also send a 1099misc for the rent paid to owner.

[thomtax]

Thus the chair rentor was not an independent contractor. Let's be clear about that. She was actually in business for herself and would also send a 1099misc for the rent paid to owner.

Perhaps you would enlighten me as to what is the filing difference in an independent contractor, who is in business for herself, and someone who is actually in business for herself (as you put it)?

LT

[BOB W]

An independent contactor is someone who works for another business. A Sole Proprietor is someone that deals with the public. Both file Schedule C and that is the only similarity.

[S T]

In the past I have had 2 different Hair Salons

One was a booth rental to the Stylists

The other was an employee.

Here is what we determined the difference

Booth Rental to Stylists - Independent Contractor - Shop Owner provided the location (Shop) which included the "Back Bar" and "Laundry" No receptionist to book appts -- Stylist then rented the Space/Chair at a weekly rate, Stylist had their own phone line, their own Liability Insurance, and collected all of the $$ from the Customer directly including Credit Cards. Stylists also provided their own products for their Customer/Client. We had an IC agreement that all Stylists signed. I am sure there were other cavaets as well, I would have to "dig" out the agreement that we set up. The shop owner had "NO" control over the Stylist whatsoever, in the terms of hours, pricing, products used, etc.

Employee: The Shop Owner paid them a wage, plus commission of the client receipts they brought in. Something like an hourly wage and 40%- 60% commission of that Stylist's Revenue. Shop Owner absorbed all costs including payroll taxes, and Work Comp, as well as supplying all products needed.

You might have to check with your State Laws to see how they determine IC vs EE.

Sandy