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Permalink Reply by Marty Glenn on July 3, 2013 at 12:24pm

I am amazed at how many times this question comes up... :)

All you have to do is ask this very simple question: Does the salon owner 'Control' anything you do?  Anything?

If the answer is 'Yes' in any way, then yes you are an employee.  The IRS has many questions, I think 16, but the one I just typed is the first one, and most cannot get past that one. Now, you only have to worry if you or her get audited.  Its the old saying, does a tree falling make noise if nobody is there to hear it? Well, if no body every finds out, how can you get into trouble?  The liability and pain if found out is on the salon owner but know that by not paying taxes and claiming you as I.C., you are not getting all that you should as an employee.

What about insurance and what would happen if you got hurt on her property (she leased it, its her property) and you were out of work.  What if one of your clients did the same?

Answer those questions and you see just how fast the great I.C. relationship gets into trouble.

The IRS website gives easy to understand statements and questions regarding this...

Hope this helps. 

Marty

SkinCareScience.com

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Permalink Reply by Krista C. on July 3, 2013 at 4:09pm

Thanks, Marty!

I guess I was confused because I assumed that because she is providing me with the equipment and product that I would have to be an employee, but I guess that's not the case.  I can still be an independent contractor with her.

Also, for my own future reference, I'm going to paste this page I found on the IRS website so I can refer to it when I need to:

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/...(Self-Employed)-or-Employee%3F

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Permalink Reply by Annette on July 30, 2013 at 3:17pm

Who is paying taxes on your salary?  that is your answer.  If you are then you are considered an independent if she is then your an employee.  If I am wrong someone stop me.

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Permalink Reply by Relax & Rejuvenate on July 30, 2013 at 7:16pm

If she is supplying equipment and products, you would be an employee, but would be willing to bet that is not what she has in mind.

I would dispute Marty's claim that the IRS information is easy to understand and straightforward. They have a clear disclaimer that no one question is definitive and these are guideline alone.

"There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.

The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination."

But in the case of supplying tools/supplies/equipment, the overwhelming majority of cases have come out as being an employee. Depending on what state you are in -- CA, IL and NY for example -- they make the IRS look like a bunch of pansies when it comes to enforcement and their interpretations of the rules are strict.

It's not an issue of who is paying the income taxes, but who SHOULD be paying the withholding taxes.

You can't swing a dead cat in this industry without hitting an establishment that IS NOT handling withholding and payroll taxes but SHOULD be.  It does not matter who IS doing it.

But don't get all excited about having to be an employee. It is not for everyone.  Your take home pay will be lower as an employee -- since the employer has to pay around 15% in additional taxes and costs for having you as an employee.  100% of your tips have to be reported to and by your employer and will be taxed

Your schedule is determined by your employer, and you are required to be on site at all working hours, and if the employer says folding towels is part of your job when you are not doing services....guess what you will be doing when  you are not doing services.

There is no free lunch.  Everything is a trade off.  You trade security -- guaranteed pay, unemployment and WC coverage and certain rights that come with being an employee -- for freedom.

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Permalink Reply by Tiffany Cataldo on July 30, 2013 at 7:29pm

Hi. There is a thin line between the two. You would be considered independent and get a 1099 for taxes. 

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Permalink Reply by Dawn C on August 8, 2013 at 11:52pm

If your commission is a 50/50split and you pay her the 50% and you cash out your own clients then you are independent butIif she gives you a check for your 50% and there are taxes on it then you are an employee. You should have to report your tips to her so that she can make sure she added it to your check and the proper taxes are taken out. You can get in trouble with the IRS if the tip recording doesnt equal at least 8-10% of your total sales for the year. Keep track of your own sales and tips to make sure they are on your checks each week.

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