Self Employed Hairstylist Tax Burden - Is This Normal for Independent Contractors?

That amount actually sounds about right. As a self-employed person, you're paying both the employer and employee portions of Social Security and Medicare taxes (called self-employment tax), which is about 15.3% on top of your regular income tax. The general rule of thumb is to set aside 25-30% of your income for taxes when you're self-employed. Based on your numbers, you're paying around 18% of your gross income, which is actually on the lower end for many self-employed individuals. Going forward, you should make quarterly estimated tax payments to avoid penalties. The IRS expects you to pay taxes throughout the year, not just at filing time. You can set up these payments through the IRS Direct Pay system or through EFTPS (Electronic Federal Tax Payment System). Also, make sure you're tracking all possible business deductions - mileage to buy supplies, continuing education, licensing fees, professional services, a portion of your phone bill if you use it for business, etc. Every legitimate deduction helps reduce your tax burden.

After struggling with my own self-employment taxes for years, I found a solution that really helped me understand my tax situation better. I used https://taxr.ai to upload my 1099s and expense records, and it gave me a clear breakdown of my tax obligations and how to reduce them. What was most helpful was seeing the difference between income tax and self-employment tax laid out clearly. Turns out I was overpaying in some areas while missing deductions in others. The analysis showed me exactly where my money was going and how different deductions affected my bottom line. I think it would be especially useful for you as a hairstylist because it helps identify industry-specific deductions you might be missing. It's worth checking out if you want to lower that tax bill next year.

Just wanted to follow up - I tried the taxr.ai thing and wow, it was eye-opening! I uploaded my income and expense info from last year and it immediately showed me that I'd been categorizing some expenses wrong. Found about $3,200 in additional deductions I could have taken for my business. The breakdown of self-employment tax versus income tax helped me understand why I owe so much better than my regular tax software did. It also gave me a quarterly tax payment schedule based on my projected income so I won't be blindsided next April. Really helpful for someone new to self-employment like me. Definitely recommend checking it out.

If you need to call the IRS to set up a payment plan (which you might want to do if you can't pay the full amount), good luck getting through! I spent literally 5 hours on hold last month before getting disconnected. Then I found https://claimyr.com which got me through to a real IRS agent in about 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c They basically navigate the phone tree and wait on hold for you, then call you when they get an actual human at the IRS. Saved me hours of frustration. I was able to set up a payment plan that works with my cash flow, and the IRS agent even explained how to adjust my quarterly payments for next year.

I have to admit I was wrong about Claimyr. After my fourth attempt to reach the IRS the normal way (and getting disconnected after 2+ hours each time), I tried it out of desperation. It actually worked exactly as advertised. I got a call back in about 40 minutes saying they had an IRS agent on the line. I was connected directly to the agent and was able to set up my payment plan in about 15 minutes. Saved me a full day of putting my phone on speaker and waiting. I was able to get back to cutting hair and making money instead of stressing about hold music. Definitely worth it when you're self-employed and every hour counts.

Hairstylist here too! Been self-employed for 6 years. What really saved me was opening a separate business checking account and credit card that I ONLY use for business expenses. Makes tracking so much easier at tax time. Also, don't forget you can deduct a portion of your rent/mortgage if you have a dedicated space for business admin work. And track EVERYTHING - even small purchases like bobby pins, hair ties, etc. add up over a year! I put 28% of every client payment into a separate savings account immediately. Hurts to see that money "disappear" but way better than the panic I felt my first year when I owed $8k I hadn't planned for!

Don't forget about state taxes too! Depending on your state, you might owe additional money there. Some states are pretty tax-friendly for self-employed people but others will take another good chunk.

Welcome to the self-employment tax shock club! I'm a freelance graphic designer and went through the exact same thing my first year. That $6,700 on $37k taxable income is actually pretty typical - you're looking at about 18% effective rate which includes both income tax and self-employment tax. The self-employment tax is the killer - that extra 15.3% for Social Security and Medicare that your employer used to pay half of. When I finally understood that breakdown, it all made sense why the bill was so high. For next year, definitely start making quarterly payments. I use the IRS's safe harbor rule - pay 100% of what I owed the previous year divided by 4. That way even if I have a good year and owe more, I won't get hit with penalties. Also consider opening a separate tax savings account and automatically transfer 25-30% of every payment you receive. Treat it like money that's already gone. It's painful at first but beats the April panic! Hang in there - it gets easier once you adjust your mindset and systems!