How to Track Tips as a Hair Stylist or Barber

Tips are a real part of how stylists and barbers get paid. They're also the part of your income most likely to go unrecorded, especially the cash ones. This guide gives you a simple way to track them without turning your day into data entry.

First, the uncomfortable part

Tips are income. Card tips, cash tips, the $20 folded into a handshake. The IRS treats them as taxable, and so does your state. We're bookkeepers, not tax preparers, so how they end up on your return is a question for your CPA. But however you report them, you can't report what you didn't track.

There's a practical reason to track them too. If tips are blended into your “income,” you don't actually know what your services earn. That matters when you're deciding whether to raise prices, drop a service or move to a new suite.

Card tips: already tracked, usually mis-filed

If clients tip on the card reader, Square, Vagaro, GlossGenius or Fresha already records the tip separately. The problem is what happens next. The payout that hits your bank is one lump sum: services plus tips minus processing fees. If your bookkeeping just calls that deposit “income,” three things get blended into one.

The fix is to record from your payment app's report, not from the bank deposit:

• Service sales as service income
• Tips as tip income
• Processing fees as an expense

Then the deposit in your bank account is just the net of those three. That's how we set up every client's books. The report at the end of the month shows services and tips on separate lines, so you can see both.

Cash tips: the two-minute habit

Cash tips have no paper trail unless you make one. The good news is that the habit is tiny.

1. Pick one place. A note on your phone, a page in your booking app if it has a cash tip field, or a small notebook in your station drawer. Not three places.
2. Write one number at the end of each day. The total cash tips for the day. Not per client, just the day. “Tue: $85.”
3. Total it at the end of the month. One number per month is all your bookkeeper needs.

If you forget a day, estimate it honestly and move on. A consistent habit with a few estimates beats a perfect system you quit in February.

If you're a client of ours, we give you a simple way to log that monthly total and we record it properly, so your books and your taxes line up.

What to do with the cash itself

You don't have to deposit cash tips to track them. But if you spend cash on business things, the trail gets messy fast. A clean habit: deposit cash into your business account when it builds up, and buy supplies with the business card. Now the expense is on a statement, and the cash tip was recorded on the day you earned it.

Venmo, Zelle and Cash App tips

These are easy to miss because they often land in a personal account. Two options:

• Point clients to a business Venmo or Cash App account that pays out to your business bank. Then it's on a statement like everything else.
• If tips land in a personal account, add them to your daily cash tip number. Treat them like cash.

If you tip out an assistant

If you pass part of your tips to a shampoo assistant or an apprentice, keep a note of what you paid them and when. How that gets reported depends on your setup and theirs. Ask your CPA. Just make sure the record exists.

A quick example

Say your Square report for the month shows $6,200 in services, $900 in tips and $190 in fees. Your bank shows deposits of $6,910. Your cash tip log says $340.

Your books should say: service income $6,200, tip income $1,240, processing fees $190. Not “income $6,910.” Same money. Very different picture.

Why this is worth the two minutes

• You know what your services actually earn.
• Your CPA gets a clean number instead of a guess.
• You're not reconstructing a year of cash from memory in April.

Tips are one piece of a renter's money picture. For the rest, read what booth and suite renters need to track, and if you'd rather have someone else keep it all straight, that's what we're here for.

We provide bookkeeping and financial reporting services only. We do not provide tax filing or tax advisory services. We work alongside your CPA or tax professional. Nothing here is tax or legal advice. Talk to your CPA about your situation.