Taxes for nail salons, restaurants and 1099 workers — what owners and technicians need to know (2027 filing season)

A W-2 employee needs one form to file. If you own a shop or receive 1099 income (nail or hair technicians, booth renters, restaurants, delivery and gig work, freelancers), you have to track your own income, deduct your own expenses and pay your own tax. Done right, it saves a lot; done wrong, the IRS sends a bill for tax plus penalties years later. This guide covers the essentials for clients in Illinois, Missouri and Texas (Texas has no personal income tax, but federal and business taxes still apply).

Who files Schedule C?

• Anyone who receives a 1099-NEC (contract pay), a 1099-K (card, Square, business Zelle payments) or cash from self-employment.
• Net self-employment profit of $400 or more must be reported and is subject to self-employment tax (Social Security + Medicare) of 15.3% — the part that surprises most people.
• Booth or chair renters are self-employed; the rent you pay is a deductible expense.
• Shop owners with employees also file payroll returns (941, 940, W-2s) and state sales tax on top of Schedule C (or an LLC / S-corp return).

Deductions — keep the receipts, keep the money

Tax is computed on profit (income minus expenses). Commonly missed deductions:

• Supplies, polish, tools, disposables; food ingredients and packaging (restaurants)
• Rent or booth fees, utilities, phone, internet, software, advertising
• Professional licenses, insurance, bank and card-processing fees
• Vehicle miles for supply runs and deliveries — log each trip
• Part of your home costs if you have a dedicated home office
• Self-paid health insurance premiums (deducted on page 1 of the 1040)
• Contributions to a self-employed retirement plan (SEP-IRA, Solo 401k) — lowers this year's tax

Quarterly estimated taxes

Nobody withholds tax for the self-employed, so the IRS expects four estimated payments a year (mid-April, June, September and January). Underpaying triggers interest and penalties even if your return is correct. We calculate each quarter's payment from last year's numbers so April brings no surprises.

Paying your workers: W-2 or 1099?

This is where shops get audited most. A technician who works set hours on the shop's schedule with the shop's supplies is usually an employee (W-2); a booth renter who sets her own prices and brings her own clients is a 1099 contractor. Paying 1099s to workers who are really employees can lead to back payroll taxes. Either way, the shop must issue 1099-NECs by January 31 to contractors paid $600 or more in the year (the threshold rises to $2,000 starting with tax year 2026) and W-2s by January 31 to employees.

Is an LLC or S-corp worth it?

An LLC separates your personal assets from the business but does not lower taxes by itself — a single-owner LLC still files Schedule C. Once profit is consistently high, electing S-corp treatment can reduce self-employment tax, but you must pay yourself a salary, run payroll and file an extra 1120-S return. We run both scenarios before recommending a change.

What to bring

• All 1099-NEC, 1099-K and 1099-MISC forms; cash and tip logs
• Business bank and card statements, receipts for large expenses, the lease
• Mileage log; health insurance statements
• If you have employees: total wages paid, 941/940 filings, W-2s/1099s issued
• Last year's return and any estimated payments made

Pricing at An Tax & Benefits

Personal returns with Schedule C start at $149; business returns (multi-member LLC, S-corp) start at $500; 1099/W-2 preparation and payroll filings are priced per worker. You get a clear quote before we start, and the preparer signs with a PTIN. Book early — February and March fill up fast.