A tax season warning for beauty professionals
Introduction
The beauty industry is one of the most creative and people-centered industries in the world, yet it is also one of the least educated when it comes to worker classification and tax law. Every year, I watch beauty professionals enter tax season overwhelmed, confused, and financially strained without understanding why. These problems are not the worker’s fault. They come from decades of misinformation and practices that the industry has normalized.
I am writing this series because tax season is almost here, and many stylists, nail techs, estheticians, and massage therapists will be filing their returns without realizing they have been carrying the financial burden of misclassification. My goal is to provide you with clarity, education, and a framework to understand what is actually happening within the industry, so you can protect yourself.
What Misclassification Really Means
The IRS defines an independent contractor through the lens of control, not through job titles or whether someone receives a 1099.
From the IRS:
“The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not how it will be done.”
And:
“You are not an independent contractor if you perform services that can be controlled by an employer, such as what will be done and how it will be done.”
This means the heart of classification is simple. If the salon controls how, when, and in what way you do your work, you are functioning as an employee under IRS standards.
The IRS uses three categories to evaluate classification:
• behavioral control
• financial control
• relationship of the parties
From the IRS:
“Facts that provide evidence of the degree of control and independence fall into three categories: behavioral, financial, and type of relationship.”
Why Misclassification Is Everywhere in Beauty
Misclassification is rarely intentional. It exists because of a lack of education and decades of repeating the same broken systems.
1. Beauty schools do not teach labor law
Beauty pros enter the workforce knowing technique and sanitation, but almost nothing about employee classification.
2. New owners copy the salons they trained in
If a salon owner grew up misclassified, they assume it is normal.
3. Workers trust what everyone else is doing
If every salon in your area pays commission on a 1099, it feels legitimate even when it is not.
4. The financial incentive
When salons use 1099 workers for roles that legally qualify as employees, the owner avoids:
• employer payroll taxes
• overtime laws
• guaranteed hourly wages
• unemployment insurance
• workers compensation
• the employer portion of required payroll taxes
This makes illegal structures look more profitable, even though the burden is pushed onto workers.
5. Most stylists never question it
They trust their employer. They want to do good work. They are not thinking about the IRS.
Employer Side Payroll Taxes Explained
Most beauty professionals have never been taught what their employer pays on their behalf when they are legally classified as employees. These are called employer-side payroll taxes, and they include:
FICA taxes
FICA covers Social Security and Medicare.
An employee pays half, and the employer pays the other half. The employer portion is paid behind the scenes.
FUTA taxes
FUTA is the Federal Unemployment Tax Act.
The employer pays this tax. Workers do not. It funds unemployment benefits.
When a worker is misclassified as a contractor, the salon avoids paying these employer taxes. The employer portion shifts onto the worker and becomes self-employment tax. This is why misclassified workers owe significantly more at tax time. They are paying the part that an employer would normally cover.
Most workers do not realize this until tax season, when the numbers finally become clear.
Industry Voices Are Warning About This Too
Many beauty professionals believe misclassification is just “how the industry works,” but educators who specialize in salon business strategy have been warning about this issue for years.
In Episode 23 of the Thriving Stylist Podcast, strategic coach Britt Seva discusses what she calls the “1099 system” and says:
“What is a ‘1099 system’ … We are under some major scrutiny right now from both state and local governments, so do yourself a favor and tune in before it’s too late.”
Her warning reinforces a truth many professionals do not realize. Misclassification is not just a tax mistake or bookkeeping error. It is something state and federal agencies are actively examining, and beauty professionals are often the ones impacted when pay structures do not align with IRS standards. Listen here: www.thrivingstylist.com/podcast/023/
What Misclassification Looks Like in Real Life
If you received a 1099 and you were:
• required to follow a set schedule
• required to follow salon protocols
• not allowed to set your own prices
• assigned clients
• required to attend training or meetings
• paid commission with no guaranteed hourly wage
• restricted from working elsewhere
Then you may have been functioning as an employee under IRS criteria.
There are additional indicators that many beauty professionals overlook.
How Money Flow Reveals Your True Classification
Many beauty professionals assume that “independent contractor” and “booth renter” mean the same thing, but they are very different under the law.
A true independent contractor
Independent contractors are project-based workers hired for specific events, limited time periods, or specialized services. Examples include:
• a makeup artist hired for a wedding party
• a lash trainer teaching a one-day class
• a photographer shooting salon content
A true contractor does not show up to the same salon every day, take clients all day, follow the salon’s systems, and work indefinitely. That arrangement aligns with employment.
A booth renter
A booth renter is a small business owner operating inside a salon. They:
• collect all payments directly from their clients
• set their own prices
• choose their own hours
• manage their own booking system
• handle their own taxes
• pay the salon a flat rent amount
The salon does not handle their money.
Where misclassified stylists get confused
If all client payments are deposited into the salon’s bank account and the salon pays you a percentage, that is not considered booth rental, and it is not independent contracting. It is a sign that you are functioning as an employee.
When money flows through the salon first and the salon decides what to pay you, the salon holds financial control. Financial control is one of the categories the IRS uses to determine employee status.
Required use of the salon’s booking system
Independent contractors run their own businesses. If you must use the salon’s booking software and cannot bring your own system or change your schedule freely, this often reflects an employee arrangement.
What a True Independent Contractor Looks Like
Here is a clear example:
A salon hires a makeup artist for a special event.
She will be there from 9:00 a.m. to 1:00 p.m. and will be paid $500.
She arrives with her own kit, controls how she does her work, and sends the salon an invoice for payment.
That is a true independent contractor. She:
• sets her rate
• chooses her products
• controls her method
• invoices the business
• operates her own business
• is not part of the salon’s daily workflow
This example helps beauty professionals see the difference between project-based independence and ongoing salon work that functions like employment.
Why This Matters Before Filing Your Taxes
Tax season reveals misclassification more clearly than anything else. When a worker receives a 1099 but functions under the salon’s control, they may face:
• surprise tax bills
• full self-employment tax
• no employer-side tax contributions
• no unemployment eligibility
• no workers’ compensation coverage
• no guaranteed wage protections
No Tax on Tips
There is growing excitement about the new “no tax on tips” benefit in the beauty industry. It is meaningful relief for service providers. However, if you are misclassified and receiving a 1099, you may not be able to claim this credit the way you expect. It was structured for employees with reported tip wages. When tips are not reported correctly, eligibility can be lost.
This series will help you understand what misclassification is, how it appears in real life, and what steps you can take next.
Part 1 Wrap Up
Misclassification affects your taxes, your income, your legal protections, and your long-term financial stability. Most beauty professionals walk into tax season without realizing they have been carrying the burden of employer-side payroll taxes, self-employment tax, and unreported tip structures entirely on their own. None of this is your fault. The industry has normalized practices that do not align with IRS criteria, and workers are the ones who pay for it.
Now that you understand what misclassification is and why it is so common in the beauty industry, the next step is learning how to recognize the signs in your own situation. Many beauty professionals are shocked when they compare their daily work experience to the legal definitions. Others finally understand why tax season has been so stressful and expensive.
In Part 2, we will walk through clear, simple indicators that help you determine whether you are functioning as an employee or an independent contractor under IRS criteria. That is where the pieces begin to click into place.