In the world of barbering, cash has long been king. But as the industry spirals deeper into the digital age, third-party payment processors like CashApp, Venmo, Zelle, and PayPal have become the new royalty. However, this convenient tool comes with a catch – one that's making financial management and tax filings a lot trickier for shop owners, school instructors, booth renters and suite leasers.

Third-party payment processors are becoming more and more strict on requiring users to provide either an Employer Identification Number (EIN) or Social Security Number (SSN) to create or maintain an account. This isn't just a formality – it's the IRS tightening its grip on the digital economy.

These payment processors are required by law to report your earnings to the IRS via Form 1099-K. This form is like a tattoo on your financial arm – permanent and very visible to the taxman.

How does it work? Let's break it down:

1. You accept payments through a digital platform.
2. The platform keeps track of your transactions.
3. If you meet certain thresholds (more on that later), the platform sends a 1099-K to both you and the IRS.
4. The IRS now has a record of your income, whether you report it or not.

It's like having a reality tv show of your finances and the IRS tunes in every night at 8:00pm.

Now, you might be thinking, "So what if they know? I'll just... not file taxes." Hold that thought.

When your SSN or EIN is linked to an account, it's like leaving a trail of hair clippings right to your door. The IRS's algorithms are getting smarter by the day, and they're excellent at connecting dots.

*If You Don't Know Now You Know: The IRS generally has three years from the date you file your return to audit you. But don't get too comfortable – this period can be extended to six years in certain cases. For instance, if you underreport your income by more than 25% of the gross income shown on your return, the IRS gets an extra three years to take a closer look at your finances.

And if you think you can outsmart the system by not filing at all? Think again. For non-filers, there's no time limit. The IRS can come knocking at any time, and trust us, they're patient - allowing interest and penalties to pile up, so by the time they come knocking, that unpaid tax bill could look more like a small mortgage.

The point is this: While you might not see immediate consequences, remember that the IRS plays the long game. Those unpaid taxes could be silently accruing interest and penalties, turning a manageable sum into a financial nightmare down the road.

It's like letting a bad haircut grow out – it only gets worse with time.

For those who use booking platforms, it's even easier for the IRS to track your income. Most booking platforms like Squire, TheCut, Booksy, Vagaro, StyleSeat, Gloss Genius, and Square are built on third-party payment processors (most commonly Stripe). So if you're using these to book clients and accept payments, you're already in the system. The IRS doesn't need to be Sherlock Holmes to figure out your income – it's all there in black and white.

Lastly, as if federal reporting wasn't enough, states are getting in on the action too. The thresholds are constantly changing per state and is usually lower than the federal threshold which is $5,000. This means if you make more than $5,000 per year using these third-party payment processors – you're either in the system or will be soon enough.

*For a full state-by-state table breakdown text "table" to 888.572.2017.

Picture this: a classroom at Wake Tech Community College, filled with the energy of aspiring barbers. It's presentation day for their business model canvas projects. The twist? All but one student chose to present ideas outside the barbering industry. Why? Who truly knows? But word on the street - fear. Fear that their barbershop ideas might be "stolen" by classmates.

I've been emphasizing a crucial lesson throughout our eight-session program: collaboration is key in business. "If you're scared to present an idea," I told them, "it likely means you don't truly believe you'll implement it."

I wanted to instill in them the confidence to share their ideas, knowing that their unique perspective and drive are what truly set them apart.

Then came the moment that changed everything.

One brave student decided to present their business model canvas on a barbershop. As the class provided feedback, something magical happened. The room transformed into a think tank of innovation. Questions about barber travel led to head instructor, William Graham, sparking a discussion about cross-country barbering. Ideas bounced back and forth. One student coined the term "chair hopping," and suddenly, we were all creating together.

I stopped the class right there. "This," I said, "is why collaboration is key. This is why focusing on your actual business - the barbershop you want to create - is so important. You're getting real-world application, real-world advice, and assistance from people who genuinely care about your success."

It was a lightbulb moment for everyone. They realized that once they step into the real world, it would be incredibly rare to have 20+ business-minded individuals giving honest, caring feedback - people who aren't just friends or family, but peers invested in their success.

The "Chair Hopping" concept, although familiar to some – has not been executed on a mainstream level, but has the potential to be a revolutionary approach to barbering that's not just about the cut, but about the journey.

Not Just In the Barbering Industry

This collaborative creation process isn't unique to the barber industry though. In fact, many successful businesses and innovations have emerged from similar collective brainstorming sessions. > Read or listen to the blog for this full section <

What happened in the classroom that day was a perfect example of this collaborative magic in action. It showed these aspiring barbers the power of open dialogue, the value of diverse perspectives, and the potential for innovation when minds come together without fear or reservation.

I rewarded them by promising that I would create a RhodeMap for this business model and we have done just that! We won't dive too deeply into the concept in our blog, but in Part 2 we'll break it down a little to give you a sneak peek - stay tuned!

So, to all barbers, remember this: Your ideas gain strength when shared. They grow when exposed to different perspectives. And sometimes, the most revolutionary concepts are born not from solitary genius, but from the beautiful construct of collective creativity.

Are you ready to collaborate? Your move boss.