If you're an aesthetician in the beauty industry, you might have heard about or experienced being classified as a 1099 independent contractor by your employer. This is a hot topic in many Facebook groups, and it can be quite confusing. Many of you have posted things like, "Hey, my boss is paying me 60/40 commission, and I'm a 1099. Is this legal?" Let’s break down what this means and why it matters to you.
What is a 1099 Independent Contractor?
A 1099 independent contractor is essentially self-employed. This means you run your own business, set your own hours, provide your own supplies, and you work for multiple clients. You’re not an employee of the spa or salon; instead, you’re a separate business entity providing services to them on a short term basis.
Why Misclassification Happens
Some spa owners misclassify aestheticians as 1099 contractors to save on taxes and other employee-related expenses. They might think that as long as they don't set your hours or because you provide your own supplies, it’s okay to classify you as a 1099 contractor. However, it’s more complicated than that.
The 20-Factor IRS Test
The IRS has a 20-factor test to determine whether someone is an employee or an independent contractor. Here are some key points:
1. **Integration* are your services integrated into the success of the business?
2. Financial Control: Does the spa control how you’re paid, reimburse your expenses, or provide your supplies?
3. Type of Relationship: Are there written contracts or employee benefits like insurance and vacation pay? Is the work you do a key aspect of the spa’s business?
Common Misclassification Signs
- Fixed Schedule: If your boss sets your hours or expects you to be at the spa at certain times, you’re likely an employee.
- Supplies and Equipment: If the spa provides all the supplies and equipment you need to do your job, you’re likely an employee.
- Ongoing Relationship: If you work continuously for the same spa without seeking other clients, you’re likely an employee.
Why This Matters
Being misclassified as a 1099 independent contractor can hurt you financially. As a 1099, you have to pay both the employer and employee portions of Social Security and Medicare taxes. This means you’re double-taxed compared to employees, who only pay the employee portion.
Real-Life Example
Imagine you're working at a spa and your boss tells you, "You’re a 1099 contractor, so you handle your own taxes." You think, "Great, more freedom!" But then, you realize you’re following their business hours, paying for all your supplies, but you're getting paid on someone’s else payroll (getting paid at regular intervals), and your only working for them, and you’re supplying all your own tools. At tax time, you’re hit with a huge tax bill because you’re responsible for both halves of Social Security and Medicare taxes.
What You Can Do
1. Educate Yourself: Understand the differences between being an employee and an independent contractor. The [20-Factor IRS Test](https://thisuglybeautybusiness.com/2014/05/the-20-factor-irs-test-why-independent.html) is a great resource.
2. Talk to Your Employer: Have a conversation with your employer about your classification. They may not realize they’re misclassifying you.
3. Seek Legal Advice: If your employer isn’t willing to reclassify you, consider seeking legal advice to understand your rights and the best course of action.
Conclusion
Understanding your classification is crucial for your financial well-being. If you’re consistently working for one spa, using their supplies, and following their schedules, you’re likely an employee and should be classified as such. Don’t hesitate to educate yourself and take action if needed.
I hope this clears things up! If you have any questions or need more information, feel free to reach out.
Kari Jo
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