^^^^
Good point.
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^^^^
Good point.
Quote:
There is a limit of $12,000 per donee, per donor, per year to avoid absorbing some of the donor's life time gift tax credit. However, there is no limit on the amount of a gift. That being said, the donor cannot deduct a gift to an individual as an expense on his/her income tax return. Thus, the gift is not income to the donee (the person who receives it) nor is it an expense to the donor(s).
Here is how the gift tax system works. A single donor can give away $12,000 per year per recipient without touching his/her lifetime exemption. (Just to keep square with the IRS it is always a good idea to file a form 709 to document the gift.)
I would add that, while all of the above is true under normal circumstances, where exotic dancers / 'adult businesses' are concerned, the IRS has established ample precedent of disallowing ""gifts"" between Sugar Daddies and exotic dancers. This has generally taken the form of paid apartment rent, paid car leases, paid shopping sprees etc. The IRS has taken the position that, rather than being a 'gift', these expenditures on the part of the Sugar Daddy are in fact payments for services rendered. As such, the IRS has held that the dollar cash value of paid apartment rent, of car lease payments, of paid shopping spree credit card bills etc. will be considered as taxable income to the dancer.
I would also add that, while the risk of an IRS audit is small providing that no 'red flags' are raised, the risk of a dancer being audited by the IRS is in fact several times higher than for an average person. One reason is that exotic dancing falls under the scope of the IRS's newly created targeted enforcement unit for 'adult businesses'. Another reason is that recent tax evasion problems for strip club OWNERS (for example Scores) result in IRS investigations of the clubs' books ... which in turn provides the IRS with personal information on dancers who have worked / are working at the club via the club's files of 'employment applications', work schedules, customer credit card payout records, funny money cash-in records etc. Thus questions raised in regard to actual club earnings vs the clubowner's reported income may spill over to questions being raised about actual dancer earnings vs the dancers' reported incomes - because by deduction if a customer spent X dollars inside the club either the club 'earned' that money or the dancers 'earned' that money. Again this is far more likely to happen in upscale clubs where customer spending has been charged to credit cards thus creating a clear paper trail for the IRS to begin following. But the IRS has also been known to send undercover agents to the club posing as customers in order to take note of the average number of customers, the average number of private dances and VIP/CR's being sold etc.
how do i lie on my taxes? i just dont see how you have to "prove" that someone else pays your rent. my parents paid my rent until i finished school.. i didnt say i didnt claim the money i made. whether i spent $xxx on clothes or on rent, i still made $xxx and pay taxes on it...
^^^ the distinction is that, as a student, you were listed as a dependent on someone else's tax return ... thus as a dependent your earnings versus expenditures were not expected to balance by the IRS. Now that you are not being claimed as anyone else's dependent, it's a different story.
I'm not exactly sure how the technical description went, but for a fact the New York dancers / escorts I was talking about were audited because someone else was paying for their apartment lease, for their car lease, and for their shopping spree credit card. While these girls were not prosecuted on either criminal or civil charges, the IRS did take the position that these ten thousand+ dollar 'gifts' from Sugar Daddies were not gifts, but were in fact 'payments for services rendered' ... and as such considered taxable income to the dancers.Quote:
While there is a lot of precedent on sham transactions, little of it involves exotic dancers
Okay, I need advice on this whole thread concept myself.
I live with my fiance. Well, when he's not in Kansas driving a truck with very few expenses and mailing back 90% (or more!) of his paychecks to me. We have a joint checking account for rent etc. I've been working as an aid to the elderly very part time... lately only 4 hours a week. The place is taking out taxes from that.
I also obviously dance, and also model part time as well.
It would obviously be really smart for me to stash away a bunch of money, which I intend to do anyway to help my parents pay for our wedding in June 2009... and then report EVERYTHING and then pay taxes on it.
The problem? I want to keep as much of my own money as humanly possible without raising any red flags.
For a couple of years, I was working full time as a corporate inventory control person but only made like $11.58 an hour. I used to put my dancing money (two nights a week) into my main account. I did report SOME of my dancer's income, but not nearly close to what I really made. Never heard any squeaks from the IRS.
I don't want to claim it all and then be shocked to find out that owe $3000 next year!!!!!
Help, please. :-\
The question then becomes, did the IRS prevail?
While you have not cited any cases, I think you are alluding to a couple of significant under reporting, bad, or failure to report, much worse, cases. In either instance, the taxpayer loses because the IRS is entitled to a presumption in court. The courts have ruled that when the taxpayer fails to report income, or significantly under reports, then whatever construction the IRS gives prevails unless the taxpayer rebuts the presumption by clear and convincing evidence. The courts do this to encourage taxpayers to honestly report their income. Honestly report, and the IRS gets no advantage in court and the gift argument is much easier to make. Fail to report other income or significantly under report and the "gifts" all become "income".
I should add that the entire problem would have been avoided had the sugar daddies filed gift tax returns. When a gift tax return is filed, it rebuts the presumption and the donee is now entitled to a presumption that it was in fact a gift.
HTH
Z
Yes the IRS prevailed via settlement agreements, to the tune of over $100 grand in back taxes. The girls' tax problem with the 'payment for services rendered' money from Sugar Daddies was compounded by the fact that they also happened to work for NYC clubs that drew IRS scrutiny for other reasons, such that the IRS had cause to research the club and develop an 'estimate' of actual dancer earnings which also did not jive with the amount of income reported by these dancers.Quote:
The question then becomes, did the IRS prevail
As we all know, working in a cash business is a two edged sword, because the difficulty the IRS faces in proving that a dancer's actual income was greater than the amount declared on her tax return is equal and opposite for dancers being able to prove that they did NOT actually earn the amount of money that the IRS 'estimates' they did. I assume this is why they chose to accept a settlement agreement rather than attempt to slug it out with the IRS in Tax Court.
That is exactly what happened in Indy with the waitresses. A couple of restaurants drew IRS attention unrelated to waitress incomes, but all of a sudden the auditors started to look at how much in tip income people really were earning.
It really turns on the presumptions. If the IRS can show significant under reporting, they have a strong hand in either Tax Court or District Court.Quote:
As we all know, working in a cash business is a two edged sword, because the difficulty the IRS faces in proving that a dancer's actual income was greater than the amount declared on her tax return is equal and opposite for dancers being able to prove that they did NOT actually earn the amount of money that the IRS 'estimates' they did. I assume this is why they chose to accept a settlement agreement rather than attempt to slug it out with the IRS in Tax Court.