Believe it or not, some techs graduate from nail school and immediately open up their own salon. Most, however, wait to get some experience first. If you’re not ready for salon ownership, you can get to work as either an employee or a booth renter. Read on to learn the differences between these types of techs.
How to Estimate Your True Income
The big question: Will I make more money as a booth renter or an employee? It may seem at first glance that you will earn more as a booth renter — after all isn’t it better to receive 100% of your service fees without someone else taking a cut? But when you calculate the overhead a booth renter faces (she has to pay rent, buy her own supplies, and buy her own insurance), you’ll find the initial numbers are deceiving. Use the worksheets on the right to estimate your true take-home pay as either an employee or a booth renter. Consult a financial advisor for more details and help with your personal situation. (Learn the difference between a booth renter and an independent contractor.
Go to www.nailsmag.com/classification.)
WORKSHEET: FOR AN EMPLOYEE
| Line 1. |
Annual Gross Income |
______________ |
| Line 2. |
Annual FICA (social security and Medicare taxes) (5.65% of line 1*) |
______________ |
| Line 3. |
Estimated annual federal and state income tax (15% of line 1**) |
______________ |
| Line 4. |
Annual cost for tools not provided by employer |
______________ |
| Line 5. |
Total of lines 2-4 |
______________ |
| Line 6. |
Annual take-home pay (subtract line 5 from line 1) |
______________ |
WORKSHEET: FOR A BOOTH RENTER
| Line 1. |
Annual Gross Income (gross service and retail income and tips) |
______________ |
| Line 2. |
Annual space rental |
______________ |
| Line 3. |
Annual tools, supplies, cost of retail product |
______________ |
| Line 4. |
Annual phone |
______________ |
| Line 5. |
Annual liability insurance |
______________ |
| Line 6. |
Annual Marketing and advertising |
______________ |
| Line 7. |
Annual misc. expenses (accountant, mileage, bank fees, etc.) |
______________ |
| Line 8. |
Total of lines 2-7 |
______________ |
| Line 9. |
Adjusted gross income (subtract line 8 from line 1) |
______________ |
| Line 10. |
Annual SECA (self-employment contributions tax) (13.3%** of line 9)
|
______________ |
| Line 11. |
Estimated annual federal and state tax (15% of line 9*) |
______________ |
| Line 12. |
Total of lines 10-11 |
______________ |
| Line 13. |
Annual take-home pay (subtract line 12 from line 9) |
______________ |
* This rate applies only to the 2011 tax year. Ordinarily the rate is 7.65% for FICA and 15.3% for SECA.
**This is just an estimate. The actual amount will vary depending on your tax bracket.
Resources:
Want more tax info? You can download the following publications from the IRS website at www.irs.gov/formspubs/index.html or call (800) 829-3676.
> Publication 1779, Independent Contractor or Employee Brochure
> Publication 531, Reporting Tip Income
> Form SS-8, Determination of Worker Status
