CAN BACK BAR CHARGES BE TAX DEDUCTIBLE?

Hi Larry,

I have a question one of our students asked me and I was wondering if you could help me find the answer?

If a stylist is charged back bar charges from their salon, can that be a tax deduction for them? If yes what type of paperwork would they need from their salon for the IRS?

No one has ever asked me that before, I thought it was a great question.

Thanks for your help with this.

Olivia

Olivia, I hope that this finds you well. Here is my best guess as an answer to your questions. I would have to have more information to make sure that this is correct.

Normally the service charge is a reduction to the wages so therefore there is no additional deduction. For example, the commission at 50% for $2,000 of services would be $1,000. But there is a service charge of say 10%. So the calculation of the wage would be $1,800 ($2000 less ($2000 times 10%) and the resulting wage before withholding would be $900 ($1,800 times 50%). As you can see, there is no additional deduction because the service charge is already deducted.

Let me know if you have any other questions.

Larry Kopsa CPA