It’s tax time again and people working in our industry may have special deductions and reporting requirements. The good folks at the Canadian Revenue Agency have prepared this helpful document to assist hairstylists and Salon owners as they prepare their 2014 tax returns.
(Please remember we’re sharing this info but we at the OHSA are not tax experts. Please refer any questions to your accountant or the Canadian Revenue Agency.)
Getting your taxes done is as easy as wash, rinse, repeat!
The faux hawk, the pixie cut, and the blunt bob—as a hairstylist, you need to know how to do it all, while maintaining high standards and staying on-trend with the latest techniques and the newest products. You’ve built up your reputation and developed an impressive clientele (who you inadvertently play occasional therapist to—no extra charge for listening like an understanding friend). You’re on your feet all day and your work schedule is demanding; but you love it because making people look great is your calling! You have style savvy, but do you have the know-how to claim your expenses and tax credits?
Whether you are paid a salary or paid by commission, you are considered an employee if you are on the salon’s payroll. As an employee, you may be able to deduct the cost of supplies you bought (like your go-to finishing spray), as long as you need it for work. To find out more about deducting employment expenses, go to www.cra.gc.ca/employmentexpenses.
You may also be able to deduct the cost of eligible tools (including that new straightening iron all your clients are raving about!) under the tradesperson’s tools deduction, a non-refundable tax credit of up to $500. You will need your employer to certify the tools were bought by you, for you, to be used directly in your work, to claim the deduction. For more information on deducting the cost of eligible tools, go to www.cra.gc.ca/trades.
As a hairstylist, part of your income comes from tips and gratuities. Clarify with your employer whether any or all of the tips you earn will be included on your T4 slip. Even if your T4 slip does not show your income from tips, it is your responsibility to keep track of these earnings and report them on line 104 of your income tax and benefit return.
Self-employment in the industry can mean different things: renting a chair, providing mobile on-site services, working from home, or owning your own salon. Generally, you can deduct any reasonable business expense you incurred or will have to pay to earn business income, such as chair rental fees or supplies and equipment like hair colour, blow dryers, and scissors. If the salon is in your home, a proportionate amount of your household expenses, such as heating and insurance, can also be deducted. For more information, go to www.cra.gc.ca/selfemployed, and select “Business expenses.”
In addition, if your business hires an eligible Red Seal apprentice hairstylist, you may qualify to claim the apprenticeship job creation tax credit. This non-refundable investment tax credit is equal to the lesser of $2,000 or 10% of the eligible apprentice salaries or wages. Don’t need to apply the whole credit amount this year? Carry it back three years or carry it forward for up to 20 years! For more information on the apprenticeship job creation tax credit and other investment tax credits, visit www.cra.gc.ca/smallbusiness and select “Investment tax credit.” For information on the 57 designated Red Seal trades, including hairstylists, visit www.red-seal.ca.
Part of owning a salon also means ensuring the proper employee contributions, premiums, and tax amounts are properly deducted and remitted to the Canada Revenue Agency (CRA), along with your own employer contributions and premiums. You will find more information on this topic at www.cra.gc.ca/payroll, by searching the payroll topics alphabetically for “Barbers and hairdressers.” Also take a look at the proposed Small Business Job Credit which helps small businesses by lowering their Employment Insurance (EI) premiums. More information can be found at www.cra.gc.ca.
The deadline to file your personal income tax and benefit return is April 30, 2015. If you, your spouse, or common-law partner is self-employed, the deadline to file is June 15, 2015. BUT, if you’re self-employed and have a balance owing for 2014, you still have to pay it on or before April 30, 2015.
Filing electronically with NETFILE is easy, secure, and lets the CRA process your return much quicker. If you’re entitled to a refund, you can enjoy your money in as little as eight business days, by combining online filing with direct deposit—”shear” genius! For a list of software and web service options, including those that are free of charge, go to www.netfile.gc.ca/software.
While you are visiting the CRA’s website, be sure to sign up for My Account. You’ll be able to track the progress of your refund, make a payment, change your address, check your benefit and credit payments and your registered retirement savings plan limit, set up direct deposit, and so much more!
To take advantage of this and other CRA electronic services go to www.cra.gc.ca/electronicservices to learn more.
Don’t miss the latest CRA news or tax tips on Twitter @CanRevAgency