EP41 - Can Hairdressers Really Thrive Independently? Discover Financial Freedom

Show Notes

Hairdressers often fear leaving a commission-based salon for chair rental, but financially the shift can be life-changing. Most stylists earning 40% commission don't realize they're actually taking home closer to 30% after taxes and withholdings. When you rent a chair and go independent as a 1099 contractor, you keep 100% of your revenue—and even after paying for supplies, taxes, and your own benefits, you typically earn significantly more while gaining complete control over your schedule, pricing, and client base.

In this episode, CPAs Anastasia and Myiesha break down the real financial math behind going independent as a hairdresser. You'll learn exactly how W2 commission structures compare to 1099 chair rental, how to manage multiple income streams (cash, Venmo, Zelle, Square), the critical deductions most stylists miss, and why the fear of going independent is often based on misconceptions. Whether you're currently working on commission or considering renting a chair, this episode gives you the numbers and strategies you need to make an informed decision about your financial future.

If you're tired of hitting an income ceiling or wondering if going independent is worth the risk, this episode delivers the clarity and action steps you need to confidently make the leap.

⏱️ Timestamps:

00:00 Introduction to Going Independent

00:54 Types of Employment for Hairdressers

01:30 Pros and Cons of W2 vs. 1099

03:24 Financial Management Tips for Independent Hairdressers

04:34 Handling Income and Taxes

08:43 Additional Business Considerations

10:05 Freelancing vs. W2 Employment: Pros and Cons

10:31 Control Over Income and Work Hours

11:37 Long-Term Value and Career Growth

12:31 Making the Decision to Go Freelance

13:33 Financial Management Tips for Freelancers

15:21 Handling Tips and Gratuity

15:53 Commonly Missed Deductions

17:26 Overcoming the Fear of Going Freelance

18:03 The Importance of Professional Guidance

20:26 Final Thoughts and Encouragement

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Creators and Guests

Host

Anastasia Aiello

Host

Myiesha Fisher

What is Lets Get Fiscal?

Let’s Get Fiscal is the money podcast for creative entrepreneurs who want to keep more of what they earn and grow their business with confidence. Hosted by CPA and tax strategist Anastasia, each episode makes taxes, bookkeeping, and money management simple, practical, and even fun. We cover topics like tax deductions, small business finances, creative business strategies, and how to avoid costly mistakes—without boring jargon. Whether you’re a filmmaker, designer, artist, or small business owner, you’ll get actionable tips, real-world examples, and a few laughs along the way. If you want to stress less about money and focus more on doing what you love, this is the podcast for you.

[SPEAKER_02]: Hairdressers often fear leaving a commission-based lawn for chair rental, but financially, the shift can be life-changing.

[SPEAKER_02]: Today, we break down why going independent gives you more control, more tax benefits, and often a bigger paycheck.

[SPEAKER_01]: Your creative genius deserves the same precision behind the numbers.

[SPEAKER_01]: Welcome to Let's Get Fiscal, hosted by Anastasia, Maisha and Danielle, part of the women-led team at Cotary Tax.

[SPEAKER_01]: From smart tax moves to cash flow strategy, weed the code everything it takes to run a thriving creative business so you can scale with confidence and sleep easy at night.

[SPEAKER_01]: Press play and let's grow your business.

[SPEAKER_02]: Hi, guys.

[SPEAKER_02]: Welcome back.

[SPEAKER_02]: I think this is going to be a fun one and it was inspired because she is fresh from the salon today.

[SPEAKER_02]: So what are we going to talk about?

[SPEAKER_00]: Um, kind of talk about the differences and changes for hairdressers.

[SPEAKER_02]: Yeah.

[SPEAKER_02]: So it's getting to what are the two different types of work is more than one.

[SPEAKER_00]: Well, yeah, no, it's the same as with all of them, you know, do you want to be a W2 employee?

[SPEAKER_00]: Ah, the salon and you know, hired directly from the salon or do you want to kind of go out on your own, rent a space or rent a chair in the salon and then be a 1099 employee.

[SPEAKER_00]: Okay, not employee, but a 1099 worker, you know, you are directly collecting payment from your clients.

[SPEAKER_00]: Oh, okay.

[SPEAKER_02]: So I'm assuming there must be like pros and cons to both sides then.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: Right.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: Right.

[SPEAKER_00]: So, you know, when you're, when you're the W2 employee, you're working for the salon.

[SPEAKER_00]: So this salon is kind of feeding you clients.

[SPEAKER_00]: Mm-hmm.

[SPEAKER_00]: And then in a lot of cases, they're paying for a lot of the materials so that you can complete that service.

[SPEAKER_00]: got your says when you decide to kind of go out on your own, you're paying a rental fee for your chair.

[SPEAKER_00]: Okay, and then you have to bring in your own clients, you set your own prices, but you also have to pay for some of your own equipment and bring your stuff there.

[SPEAKER_00]: Okay, so sometimes that can be a little bit scary, you know, especially the the client portion because, you know, once you're renting your chair, something the client in this salon isn't really incentivized to give you clients and who are because they're only getting your rental fee every single month, you know,

[SPEAKER_00]: you are really turning into a small business owner at that point in time.

[SPEAKER_00]: So it can seem very overwhelming.

[SPEAKER_02]: Yeah, I can imagine freedom, too.

[SPEAKER_02]: I feel like as well, like there's more freedom if you become like your own person off to the side.

[SPEAKER_02]: Yeah, right.

[SPEAKER_00]: Right.

[SPEAKER_00]: Right.

[SPEAKER_00]: You are able to control your own schedule a bit more, you know, your schedule rises too.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: You're, you're doing your own pricing, you know, maybe a little bit more restrictive on the services or you're like, you know, gearing towards one service more than another.

[SPEAKER_00]: Okay.

[SPEAKER_00]: Instead of kind of whoever this one is, you know, a walk-in that's coming in.

[SPEAKER_00]: That's coming over to you.

[SPEAKER_00]: So, um,

[SPEAKER_00]: You know, I wanted to talk through kind of why it shouldn't be scary.

[SPEAKER_00]: Yeah, let's do it.

[SPEAKER_00]: I have my own own.

[SPEAKER_00]: So a lot of it, you know, once you go out on your own, it's about tracking everything.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: And then also, you do get a bit of a larger tax bill because when you're W2 employee, they're already taking out the social security and they're already taking out the Medicare.

[SPEAKER_00]: But when you kind of go out on your own, now you're responsible for making those payments yourself.

[SPEAKER_00]: They're not going to just be automatically taken out of your check as you're going through.

[SPEAKER_00]: So, um, so that's something to kind of keep in mind.

[SPEAKER_00]: And then also,

[SPEAKER_00]: Like income because some people want to send you so some people want to send you a Venmo Like there's some people give you cash So okay, no, it's a little bit different then you know, maybe a service based business where you can just send an invoice through a quickbooks and it's all in one place And it's all these one things like you know like I said like it could be sell it could be Venmo you could have like a square

[SPEAKER_00]: Yeah, yeah, processing units.

[SPEAKER_00]: So you're taking payments from a bunch of different places.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: Um, so I think one of the biggest things is just making sure that all of your income goes into one account.

[SPEAKER_00]: That is fair.

[SPEAKER_00]: That is also not your personal account.

[SPEAKER_02]: Yes, and we don't want co-mingling.

[SPEAKER_02]: Yeah, we don't want hard on the no-moingling.

[SPEAKER_02]: Okay, because even when you go on your own, even if you're 1099, that is a business like you were separate.

[SPEAKER_02]: Okay, right.

[SPEAKER_00]: Right.

[SPEAKER_00]: And whether or not you know you file information with a state, you can still go to your bank and ask them for a sole proprietorship bank account.

[SPEAKER_00]: So, you don't have to go and get an LLC or a corporation or anything in order to set up a separate account.

[SPEAKER_00]: We're all of your income is going into.

[SPEAKER_00]: So, that's one of the easiest ways is to just make sure that it's all going into one spot because otherwise, you're going to have stuff in all different places and it's going to be a little bit difficult.

[SPEAKER_00]: Also, if you receive Venmo,

[SPEAKER_00]: You want to make sure that you're depositing the full amount into the account, so because what you can do is somebody pays you through Venmo and then you keep it in your Venmo account and then you have your assistant and you pay them from your Venmo balance.

[SPEAKER_00]: Well now you have like income that you've received but it's not included on your tax return but it will be on your 1099K.

[SPEAKER_00]: and everything gets muddled.

[SPEAKER_00]: So, you know, I try to be very careful about spending from a Venmo balance because it can get really tricky kind of towards the end of the year.

[SPEAKER_00]: So if you are doing something like that, it's not terrible.

[SPEAKER_00]: You can still go into Venmo.

[SPEAKER_00]: You'd have to download the statements and it's every, you can only go 90 days.

[SPEAKER_02]: Yeah, which is annoying monthly too.

[SPEAKER_02]: They don't allow you to combine them into one thing to just get one thing report.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: And if you want the longest, it's 90 days, but it's not three months.

[SPEAKER_00]: It's exactly 90 days.

[SPEAKER_00]: Yes.

[SPEAKER_00]: So sometimes it is.

[SPEAKER_02]: And we have to do it right.

[SPEAKER_02]: No, they're all reporting systems.

[SPEAKER_02]: We need most of the knowing thing to dig in, too.

[SPEAKER_02]: Right.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: So if you are spending from your grandma balance,

[SPEAKER_00]: just the way that Vemmo reports it for your accountant, you are going to pay extra for that.

[SPEAKER_00]: So it's a lot easier if when you get a payment from your Vemmo, just transfer 100% into that income account that way, you know, yes, this is all of the cash everything that I perceived.

[SPEAKER_00]: And we also do want to be careful that we are claiming everything.

[SPEAKER_00]: It's, you know, some people are like, well, you know, like if it's cash and I don't put it in my bank account or what have you, but I mean, the IRS can still figure it out, you know, I mean, especially if you went from W to employee over to, um,

[SPEAKER_00]: going out on your own, they know how much that you needed to earn in order to survive these last couple of years.

[SPEAKER_00]: So if that drastically drops because you're taking all these cash payments, then they're going to say, okay, well, what happened and how are they surviving?

[SPEAKER_00]: So especially if you make that a habit where like, you know, you're income just suddenly dips and then it's that level for a really, really long time, then they're going to say, well,

[SPEAKER_00]: how are you, you know, like they know the cost of living and all of these different cities and there's different calculations that they can use.

[SPEAKER_00]: So I always say claim everything, you know, number one because there's always tax strategies that can be done to get rid of, you know, to help with that tax liability and even there's certain situations like the earned income credit.

[SPEAKER_00]: you know, if you have no income, you can't get the credit, but if you are earning money and just below a certain threshold, then the IRS will give you this credit, and you'll get a bit of a refund to help you get through these next phases of things.

[SPEAKER_00]: So...

[SPEAKER_00]: That's why they like, you know, the goal isn't necessarily to net fair pay any taxes, you know, it's to let's get to the right amount and then also use these other strategies.

[SPEAKER_00]: So, you know, things like once you're not a W2 employee anymore, you know, you're not eligible for the retirement plan.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: You know, so that you want to make sure you're still paying into like a Roth IRA, especially in the beginning, or you can fund your step IRA.

[SPEAKER_00]: Also health insurance.

[SPEAKER_00]: So health insurance is a business deduction as long as your spouse isn't offered health insurance.

[SPEAKER_00]: have their place of business.

[SPEAKER_00]: So you can still go to the go to the health care market place or go to one of the health insurance companies directly and then that would just be an additional business expense, you know, as you're going through.

[SPEAKER_00]: So, you know, maybe instead of getting like

[SPEAKER_00]: a 40% commission.

[SPEAKER_00]: Now you're getting a hundred percent, but we still want to take into account, you know, 30% of that is going to go towards your taxes and then some will go towards these other things that creating the benefits for yourself paying for the materials things like that.

[SPEAKER_00]: So you can still, you know, I would still live within that 40% but now it's still even more than that because at 40% was subject to social security and Medicare and all the other stuff.

[SPEAKER_00]: So really you were only getting maybe 30% so when you kind of go out on your own, if you have a full book of clients, you know, most likely right off the bat you're going to be earning more.

[SPEAKER_00]: ready.

[SPEAKER_00]: And I mean, it's always the issue that we see when it comes to, you know, are you going to be W2 versus 1099.

[SPEAKER_00]: And that's really when you're W2, there's always going to be a ceiling.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: So, you know, when you're a 1099, you know, in your freelance, you really have a lot more choice in what you want.

[SPEAKER_00]: So, because you can control your hours, you can control how much work you do.

[SPEAKER_00]: You can control your income a lot better.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: It's not like, oh, am I, you know, can I stay for for?

[SPEAKER_00]: you know over time or things like that you know if you want to earn more there is a direct pathway where you can earn more versus in a W2 situation you know there's a lot of cases where you have to just do a hundred percent a hundred and fifty percent of the work and hope that somebody recognizes you and hope that they are able to give you something you know and normally

[SPEAKER_00]: increase that right now is less than what inflation is.

[SPEAKER_00]: So really the longer you're in a W2 position.

[SPEAKER_00]: You're actually moving backwards.

[SPEAKER_00]: Gotcha.

[SPEAKER_00]: Okay.

[SPEAKER_00]: You know, because if you're comparing year one and you're five.

[SPEAKER_00]: Unless you had like a major major promotion, if you stay at the same place, you're probably in your five going to be having like less value.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: Then what you did at year one versus you have a bit more control over that.

[SPEAKER_00]: When you are your own business owner so that you can make sure like yes, I've been working hard Now I have a lot more experience, you know, I'm doing like much harder Services and Complicated people are coming to me very specifically for these things because I have so much talent in it and Your further along in your five than what you would be if you would just stayed as a W2 employee at that point in time

[SPEAKER_00]: Okay.

[SPEAKER_02]: Oh, sorry.

[SPEAKER_02]: You go ahead.

[SPEAKER_00]: Oh, I was just going to say, you know, like that's one of the things that you have to ask yourself is, you know, where do you want to be in five years.

[SPEAKER_02]: Yeah.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: And if the question is, you know, and sometimes, you know, like, yeah, maybe you just want to still be in the same spot.

[SPEAKER_00]: You, you know,

[SPEAKER_00]: Um, that is that's really fine.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: It's okay to know what's at all these extra things.

[SPEAKER_00]: Yeah, but if you're saying, you know, in five years, I want to be, you know, not this physician, then, you know, the past way may be to be your own business owner at that point in time.

[SPEAKER_02]: And I think making it not seem so scary can make it very helpful to actually make that decision.

[SPEAKER_02]: If the thing holding you back is that you're just like, uh, just seems like it's a whole lot or whatever.

[SPEAKER_02]: And it's really like, if you break it down, it's not too bad.

[SPEAKER_02]: It's really about just like starting right with the right practices and doing your different things to like really help yourself.

[SPEAKER_02]: But yeah, I think it's easier to make a decision if you know what all the actual options are and like how

[SPEAKER_00]: how difficult it may be, and that's where, you know, especially if you're kind of unsure having, you know, having the separate bank accounts, where you're saying, okay, all of my income goes into this one bank account, then I have 30% goes into my tax savings, and then you have, you know, the other 30% goes into an account where you use for all of your supplies,

[SPEAKER_00]: And then the 40% goes to you because then that's like basically the same amount that you were getting before But now you're already covering all of these things and the only difference there is yet might still be the same 40% But if there's an overage in your tax account that money's right back into your pocket

[SPEAKER_00]: And different things like that.

[SPEAKER_00]: And then you have the opportunity of like picking what retirement plans you would like picking a better health plan for yourself, you know, and then also picking different hours and you're not stuck on someone else's schedule and plans and things and there is a lot more free end to it.

[SPEAKER_00]: Yeah, if you go that route.

[SPEAKER_00]: being able to choose your own nation, you know, really sticking to that.

[SPEAKER_00]: Or even if you don't like all the clients and you want to just work with them.

[SPEAKER_02]: I mean, like, you know what I mean?

[SPEAKER_02]: Like if there's certain clients that you're just like, oh, well, if I kept doing this, I'm just going to keep getting this, like, this level clientele or these types of clients and whatnot, like, not everybody messes.

[SPEAKER_02]: So it'll be nice if you're just like, I am literally only going to work with people that I enjoy being with.

[SPEAKER_02]: And like, doing that.

[SPEAKER_02]: So there's my freedom with it.

[SPEAKER_00]: Yeah, because there are different, like, aesthetic, so yeah, client basis for different salons.

[SPEAKER_02]: Exactly, that's, you know, yeah, so that's fair.

[SPEAKER_02]: I did have some questions, so like when it comes to the income.

[SPEAKER_02]: So when the income is coming in and it's coming from different areas, uh, being a hairdresser usually means that you're dealing with tips and gratuitity and whatnot and then that should they be treating that differently or is it okay that it kind of just stays in that bucket as long as it goes into that separate business account?

[SPEAKER_02]: Yeah, because you know, it's sometimes it's separated out on these reports and things when you're getting paid and whatnot Or it's like oh, I paid for service plus tip and like do they need to track that?

[SPEAKER_00]: Yeah, it's the different kinds of questions and just like when you're a W2 employee You need to claim your tips.

[SPEAKER_00]: Yes, those will be considered income.

[SPEAKER_02]: Yes, so they'll good that they all go into the same bucket and whatnot

[SPEAKER_02]: And then at what do you like in your experience and stuff like what deductions maybe are being missed sometimes by the ones that go out on their own so the ones that are their own business owners of.

[SPEAKER_00]: Yeah, I mean you know you have you have the regular materials you have your equipment if you're buying new scissors and things like that.

[SPEAKER_00]: But also the education pieces, so if you're going to different conferences or training sessions, you know, you want to learn how to do extensions.

[SPEAKER_00]: Like all of that stuff can be considered a business expense now versus if you were W2 employee that would just be something that you were doing kind of on your own out of your own pocket.

[SPEAKER_00]: And it's not that.

[SPEAKER_02]: Yeah.

[SPEAKER_00]: So continuing education for sure.

[SPEAKER_00]: Okay.

[SPEAKER_00]: Cool.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: Then also, you know, like if you have an Instagram page,

[SPEAKER_00]: you know sometimes there's subscriptions for that, it makes it easier for you to edit the edit the posts or schedule them or what have you, because you know a lot of it too is like making sure that you have your portfolio ready, you know, so it's very important for your professors.

[SPEAKER_00]: So yeah, yeah, like having some sort of social media or a website or some way that people can see that, you know, that's all considered a business expense as well to like software subscriptions and things

[SPEAKER_02]: And then we've kind of already talked a little bit about like the very clear like lifestyle changes that kind of go with it and whatnot.

[SPEAKER_02]: Do you think there's any like major miss or anything that's holding silice back from going out on their own and renting a chair versus doing the W2?

[SPEAKER_00]: I think it's just like where it's a little bit scary, you know?

[SPEAKER_00]: Like you have to jump off the cliff.

[SPEAKER_02]: Yes.

[SPEAKER_02]: as a non-business owner, that sounds very scary.

[SPEAKER_02]: Even knowing the things, it's still just like you really have to put yourself out there.

[SPEAKER_00]: Yeah, in seeing if you'll think it's what I'm kind of like.

[SPEAKER_02]: Yeah.

[SPEAKER_00]: Yeah, you have to, you know, you have to take that first step and jump off the cliff and just kind of go for it.

[SPEAKER_00]: You know, so it's just making sure that you

[SPEAKER_00]: have all of this understanding in place and you have somebody that you can kind of turn to.

[SPEAKER_00]: So, you know, you know, don't go to one of those like box, you know, tax preparation places, or try to do it yourself online.

[SPEAKER_00]: You know, it really saves you money.

[SPEAKER_00]: paying someone else to be there for you, to help walk you through this process.

[SPEAKER_00]: You know, whether that's like, you know, you have less anxiety and you can sleep better at night and you're able to like make these better decisions on, you know, so you're not constantly stressed about this business side of things, but also normally they're able to.

[SPEAKER_00]: guide you in ways that they're more than, you know, they're saving you more than triple, whatever their cost is, you know, there's so many cases where people try to DIY it and they end up costing themselves a lot more money in the end, you know, like people are like,

[SPEAKER_00]: Oh, I had my taxis done for free.

[SPEAKER_00]: And I'm like, great, because that cost, you lost $30,000 in tax savings.

[SPEAKER_00]: So it actually costs you $30,000 for somebody to not be paying attention to you.

[SPEAKER_00]: You know, so it's just really having some of that guidance and making sure that not only are you educating yourself on like elevating your knowledge and your skills, but also making sure that you're taking the time to really understand.

[SPEAKER_00]: this other side of things and just knowing where you want to go with it because all of their responses are going to be different depending on where you want to go and what your end goal is.

[SPEAKER_02]: It's always a really hard question.

[SPEAKER_02]: What do you want?

[SPEAKER_00]: So making sure that you have that kind of clear in your mind and that you're communicating that to the mentors and support team around you and just making sure you have a support team around you, like do you actually sell product and you have to collect sales tax and what does that look like and setting up your payment processor to show the difference

[SPEAKER_00]: You know, all of those different things and they kind of tell you, you know, the pros and cons of making some of these decisions and then you can go from there.

[SPEAKER_02]: Yeah.

[SPEAKER_02]: I think that would take a lot of the scary out.

[SPEAKER_02]: So, yeah.

[SPEAKER_02]: Yeah.

[SPEAKER_00]: No, that's very, very cool.

[SPEAKER_00]: Yep.

[SPEAKER_00]: That's so if you have any questions about kind of going out on your own and taking that leap, feel free to put a comment below or send us an email and we are more than happy to talk through your particular situation.

[SPEAKER_01]: That's it, let's get this goal.

[SPEAKER_01]: Ready to stop guessing and start saving.

[SPEAKER_01]: Click the link in the show notes, grab your console, and let's make your business work for you.

[SPEAKER_01]: Not yet the way around.

[SPEAKER_01]: You've got this.