View Full Version : What types of deductions can I claim when filing taxes?
Fionaver
05-08-2009, 02:16 PM
What about my contract though? If I have these minimum tipouts in writing, as part of my contract with the club or initial hire paperwork (which I did get copies of) - would that help at all?
Also, I had to write an explanatory letter in addition to my schedule C because my actual and reported earnings didn't mesh, in which I reported the club's refusal to let me claim less than $50 per day - whether I had made it or not.
Melonie
05-08-2009, 08:27 PM
^^^ again not wanting to rain on any parades, but an 'illegal' contract is not enforceable ! At best it will prove that your 'intentions were good'. But it is not likely to be persuasive in getting the IRS to allow you to operate under a 'different set of rules'.
Also, I had to write an explanatory letter in addition to my schedule C because my actual and reported earnings didn't mesh, in which I reported the club's refusal to let me claim less than $50 per day - whether I had made it or not.
RUN ... I repeat ... RUN to a different club ASAP ! Not only is the way your club operates a technical invitation for an IRS audit, but your letter of explanation will serve as a gold plated invitation to the IRS (i.e. you have provided them with signed testimony that your club is in breach of 'employer' tax regulations). It may be too late anyhow, since IRS audits of clubs usually lead the IRS directly to the club's file of dancer job applications / contracts, which will contain your real name, real address and real SS#.
babybambi08
05-08-2009, 09:30 PM
why dont you just deduct the tip out and house fees before you claim it. say you make 200 you have to tip out 30.. just say you made 170.. thats what I would do..
Melonie
05-09-2009, 04:23 AM
^^^ again because it's technically wrong to do so. Granted that following this 'net nightly income' approach will be viewed more favorably by the IRS than underreporting income.
babybambi08
05-09-2009, 09:28 AM
ohh ok
Zofia
05-10-2009, 05:27 PM
why dont you just deduct the tip out and house fees before you claim it. say you make 200 you have to tip out 30.. just say you made 170.. thats what I would do..That is the correct way to report. The tip outs are not accessions to wealth which are clearly recognized. That is the Supreme Court's test for income. However, to use the correct method, you have to have contemporaneous accounts. For example you need to make a nightly deposit into the business account. Then, the nightly deposit becomes your contemporaneous record of income.
HTH
Z
phonehome
05-11-2009, 01:44 PM
More people disagree with this approach that agree.
It is a basic rule with the IRS either you pay taxes on X amount or tell the IRS who you gave it to (via 1099) so they can get it from them. You can't "take a deduction" for money that goes to "no one"
To the best of my knowledge the particualars of the case Z is always citing were that the taxpayer in question had X amount of dollars withheld from him/her by the "employer" IE Club and paid it directley to other IC's on his/her behalf, as such he/her could claim to have never had posseion/control over the money in question. The quote I remember from the case was "had dominion over"
This is clearly NOT the case with tipouts 99.9% of the time. The dancer/taxpayer in question DOES have for a period of time however short have "possesion of/control/dominion over" the money in question.
No matter how much the taxpayer/dancer in question is lead to believe that she has no choice about paying X dollars to who ever, in cases such as this the IRS has held that such payments are in fact "voluntary"
An analogy" you are a contractor you may be made to believe that you must tip/bribe your I/C concrete company to get them to make timely deliveries and perform the concrete work, so you do.
Well the IRS won't let you deduct bribes either.
That is in the end what these "tipouts" amount to, you are bribing people to do things for you because you for whatever reason believe you need to to further your "business"
Official IRS rules say document VIA 1099 or call it a "gift" a "non-deductible gift"
Zofia
05-11-2009, 05:33 PM
phonehome, you just don't know what you are talking about. So I am not going to waste anymore time trying to explain this to youwith you. Cite a rev.pro, rev.rule or case to which the CIR has acquiesed or go away.
Z
phonehome
05-12-2009, 12:11 AM
Z
No you are the one who is wrong. You have found one obscure case that in your mind fits with what you are trying to do and you are sticking with it.
Melonie who most people on here agree knows a thing or two about taxes says you are wrong, she has stated in other related threads that her CPA has advised her the same, that you are wrong, In all the years of doing VITA work with the IRS, every IRS agent that I ever knew that provided training on what the tax law actually was say you are wrong.
In all the threads on this board related to this subject to the best of my knowledge NO ONE to has ever agreed with your asertion on this.
Have you ever actualy been audited and got an IRS agent to agree with this?
phonehome
05-12-2009, 09:26 AM
More on this.
This entire "I never earned it to begin with" theory only works in case where the taxpayer gets/earns a bunch of cash that unless he/she reports it it go just that "un-reported".
So explain this scenario:
You work at a club, most likley a "funny money" club and even the "tips" you get after a dance are paid in in funny money and the club documents VIA 1099 to the IRS in addition to the CC payments that they collect on your behalf which is pretty much the norm, also ALL the funny money that you cash in. So to go with the above 200 dollar example your 1099 "entry" for that day would be 200 dollars not the 170 "after tipouts" figure.
Now the IRS has a 1099 that states you earned 200 dollars, using nothing more than the case you love to cite and your self generated records that they can just easily choose not to believe as believe that basically says you gave 30 dollars to "some guy" some guy you can't name how are you going to get them to believe that?
This entire approach is an open invitation to tax fraud if it were ever widely accepted, you pay 30 dollars a night, well who is to say that you won't claim via your self generated records it's 50 or 75 and pocket the difference?
It only works because no knows what you actually make and if you choose to under-report you income by 10 or 20 % no one will know.
BTW for purposes of the example EVERY club in the world is the same you so can't just say "well I would move to another club"
Melonie
05-13-2009, 05:44 PM
Now the IRS has a 1099 that states you earned 200 dollars, using nothing more than the case you love to cite and your self generated records that they can just easily choose not to believe as believe that basically says you gave 30 dollars to "some guy" some guy you can't name how are you going to get them to believe that?
the point is even more basic than this. The IRS may very well believe that the dancer paid out $30 a night for 200 nights last year to a DJ or bouncer. The question that the IRS will raise is whether or not this $6000 expense gets categorized as a legitimate business expense tax deduction or a 'voluntary' non-deductible gratuity. The dancer issuing a 1099 in the name of the DJ or bouncer proves the former. In the absence of a 1099 being issued, the IRS will argue the latter.
As I said earlier, the IRS would prefer to see 'net' income reporting versus NO income reporting or gross UNDER reporting ... but that does not make the 'net' income reporting approach 100% acceptable. But given the 'real world' situation which is created by a large number of clubs, often dancers are left with 'net' income reporting as their only practical alternative. Again this does not mean that they won't get 'called on it' by the IRS if and when they are ever audited in depth.
!