- Always keep detailed records of your income and your expenses. Keep a notepad with you at work to write down notes about tip earnings and business expenses. Transfer notes from your notepad into an Excel spreadsheet or a budgeting software program to track income expenses for the year. Keep all receipts in case you are audited.
- You should deduct all of your business expenses that are not reimbursed by your employer. Such expenses may include chair rental fees; special uniforms or aprons; business cards; advertising costs; tuition expenses for continuing education; conference registration fees; and travel expenses such as mileage, lodging and meal expenses when attending meetings and conferences. Also, deduct the cost of equipment such as scissors, hair dryers, straightening irons, combs and brushes.
- To maximize your tax savings and avoid errors, consult with a tax professional or accountant. You may want to spend extra money to pay for your taxes to be completed by a professional so that you can avoid costly mistakes. Ask fellow cosmetologists to suggest competent accountants who are familiar with cosmetologist-related tax issues. You can then deduct the amount paid for tax preparation on the your next year's tax return as a miscellaneous expense.
- To reduce your tax liability, make sure to claim every deduction you qualify for. Some often-overlooked deductions include childcare expenses, subscription costs for trade magazines and business license fees. If you buy birthday or Christmas gifts for your boss, coworkers or clients, you can even deduct up to $25 for each individual gift purchased during the tax year, as of August 2011.
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