Stripper for the summer. Will my parents find out from my taxes?
Hi all,
I'm an 18 yr who just took up stripping for the summer. I've made about 10k total, about $2500 of which was in credit card tips. Obviously I need to file taxes, but I am still a dependent of my parents. If I do my own taxes but am still listed as a dependent of my parents, will they be able to see a) my place of employment or b) how much income I made? I am still legally a dependent of my parents as they are providing significantly more than 50% of my support. I believe my club will issue a 1099 for the credit card tips, and I will need to file schedule C as an independent contractor. Will my parents be able to see that I have filed a schedule C?
Note: filing my taxes as an independent is not an option.
Re: Stripper for the summer. Will my parents find out from my taxes?
Given that you're 18 and in Houston, I can only think of one or two "big" clubs that you could be at. Neither of them use their club names on business transactions. Rather, they have a more innocent alias, like a steakhouse or something like that. It seems a pretty common practice. If nothing else, you could tell your parents that you have been working as a brand ambassador under the umbrella company that owns whatever restaurant/company name that your info is filed under.
I had a similar concern a year or so ago, but no problems came of it. I don't know the answers to your dependent questions for sure, so I'll let someone more knowledgeable handle those. But there are always ways to get creative with your job title, so don't be too worried.
Re: Stripper for the summer. Will my parents find out from my taxes?
While you didn't specifically say so, I take it that you are still listed as a dependent of your parents and 'stripping for the summer' because you are a college student ? If so, then your parents need to be informed of your dancing income prior to filing your next FAFSA student loan / grant application, since that application is based on 'total household income' i.e. the total of your parents' income plus your own income. Due to automatic reporting by college bursar's offices and information sharing between the IRS and FAFSA, there is no way for you ( or perhaps more importantly your parents ) to avoid including your dancing income without risk of future IRS audits / FAFSA claw backs. Use the 'search' function with keyword FAFSA to see a whole bunch of related discussions.
Re: Stripper for the summer. Will my parents find out from my taxes?
I've always paid cash in the stripclub, which I assume goes unreported. Are you telling me that charges aren't just "cash advances" for customers and that the girl they spend the money gets reported via a 1099?
Re: Stripper for the summer. Will my parents find out from my taxes?
If your parents file with you as a dependent, then your taxes are all filed together, meaning that you can't file seperately so they don't find out. Have you given them some sort of cover job for the summer? You'll have to give them your 1099 so that they file with it, or else things will get messy.
Re: Stripper for the summer. Will my parents find out from my taxes?
Quote:
I've always paid cash in the stripclub, which I assume goes unreported. Are you telling me that charges aren't just "cash advances" for customers and that the girl they spend the money gets reported via a 1099?
if the customer credit card charge is processed through the club's cash register, then the club must claim every dollar transacted as club income UNLESS they issue 1099's to document the fact that part of that customer money was in turn paid out to someone else i.e. dancers. However if the customer credit card charge is performed by the customer via an ATM - who in turn hands cash to the club / to dancers - then there is obviously no absolute need for 1099's.
Re: Stripper for the summer. Will my parents find out from my taxes?
Quote:
Originally Posted by
bem401
I've always paid cash in the stripclub, which I assume goes unreported. Are you telling me that charges aren't just "cash advances" for customers and that the girl they spend the money gets reported via a 1099?
I believe starting this year the clubs are either required to pay taxes on the ''funny money'' that is used to pay for dances if it is rung thru the register....or they are required to provide a 1099 for the amount that the dancer was paid ''thru the register''. I would assume most clubs will issue the 1099 and have the dancer pay the taxes as opposed to paying them themselves. All part of Obamacare law scenario.
Re: Stripper for the summer. Will my parents find out from my taxes?
^^^ indeed, if the provisions of the new Obamacare law are followed by the clubs, the only money paid to dancers that won't appear on a 1099 form next year will be dollars directly paid from the customer's hand to the dancer's garter.
Also, to clear up a somewhat ambiguous response, it IS possible for a student dancer who is still categorized as a dependent of her parents to file an independent tax return and independent Schedule C that is totally separate from the tax return filed by the parents. Quite a few dancers choose to do this because it avoids having to show their parents club 1099's and other financial details of their dancing 'business' ( like how many stripper outfits they purchased ).
However, in filing a separate tax return, the dependent dancer will not be able to claim a personal exemption for herself on her own tax return. This will result in higher federal ( and state ) income tax rates kicking in at lower levels of reported income for the dependent dancer. Without the personal exemption, Social Security / medicare taxes will take a 15% bite of every dollar of dancing income. On top of that, federal income taxes will take a 10% bite of the first $8,700 of dancing income, rising to 15% on income in excess of $8,700.
Or put another way, the personal exemption for yourself is probably worth somewhere around $3,000 in reduced income tax liability. If your parents get to claim your personal exemption because of your dependent status, THEIR tax bill gets reduced by $3,000 while your separately filed tax bill doesn't get reduced at all. And with no estimated tax withholding by an 'employer', unless the student dancer has been filing / paying quarterly estimated tax payments to the IRS throughout the year ( next one is due on Sept 15th for income earned between June 1st and Sept 1st ) the student dancer will be required to pony up the entire tax bill in cash before April 15th 2013.
This is of course avoided if the 'dependent child's' dancing income is not reported separately, but incorporated into the parents' tax return filing. Based on an estimate that you will earn $20k or so by dancing through the summer, the decision to file a separate tax return will effectively cost you somewhere around $5,000 out of your own pocket, while increasing the amount of your parents' tax refund check by $3,000. Reporting your income as a 'dependent child' on your parents' tax return will essentially cost you zero dollars ... assuming that your parents don't ask you for a cash contribution to help defray the additional $2,000 net tax liability your dancing income will generate for them !
However, as briefly discussed earlier in this thread, even if a dependent student dancer elects to file a separate tax return, if FAFSA student loan / grant applications are involved she will STILL need to inform her parents of the amount of money she earned ... since the FAFSA application is based on 'total household income' which includes both the parents' income and the dependent student dancer's income.
However, providing parents with 'nitty gritty details' of her dancing business is only necessary if the student dancer elects to incorporate her dancing income tax liabilities into her parents' tax return. Since the dancing income incorporated into the parents' tax return is just as subject to IRS audit as the parents' income, any thorough tax preparer engaged by the parents will undoubtedly want to see club 1099's, receipts for 'business expense' items like outfits and shoes, the dancer's 'account book' showing nightly cash tip earnings and tipout payments etc.
Re: Stripper for the summer. Will my parents find out from my taxes?
First of all, thanks so much for all of your replies.
Everyone keeps talking about FAFSA... my cousin told me that in years past, she just filed the FAFSA on her own. She would fill out her own information and then call her dad and ask all the necessary questions (i.e. income) and then add his answers to hers for total household income. Isn't it possible that I could do that? I realize that your parents are technically supposed to fill out their own portion, but it seems like its pretty easy to just fill it out for them as long as you have them tell you the correct line items from their tax return.
As for a way to explain the 1099, could babysitting work? I've been telling my parents I've been babysitting all summer.
Re: Stripper for the summer. Will my parents find out from my taxes?
^^^ in regard to FAFSA applications, if 'deliberately' incorrect financial information entered for the purpose of obtaining student grant money to which the student would be ineligible had the correct information been provided, both the parents and the student could technically be viewed as being guilty of 'defrauding the gov't'.
And unless you're talking about a 'formal' day care corporation, babysitters do not receive 1099's.
Re: Stripper for the summer. Will my parents find out from my taxes?
Quote:
Originally Posted by
Melonie
And unless you're talking about a 'formal' day care corporation, babysitters do not receive 1099's.
What if she was working through a "babysitting agency" would they then give 1099s perhaps? I don't know how well a baby sitting cover would work though if you are making quite a bit with dancing. Babysitters don't make THAT much.
Good luck!
Re: Stripper for the summer. Will my parents find out from my taxes?
Quote:
Originally Posted by
Melonie
...However, in filing a separate tax return, the dependent dancer will not be able to claim a personal exemption for herself on her own tax return. This will result in higher federal ( and state ) income tax rates kicking in at lower levels of reported income for the dependent dancer. Without the personal exemption, Social Security / medicare taxes will take a 15% bite of every dollar of dancing income. On top of that, federal income taxes will take a 10% bite of the first $8,700 of dancing income, rising to 15% on income in excess of $8,700.
Or put another way, the personal exemption for yourself is probably worth somewhere around $3,000 in reduced income tax liability. If your parents get to claim your personal exemption because of your dependent status, THEIR tax bill gets reduced by $3,000 while your separately filed tax bill doesn't get reduced at all.
Not so fast. Assuming all $10,000 is reported and there are no corresponding ordinary and necessary expenses and assuming that the taxpayer is claimed as a dependent on her parents tax return and assuming she lives in a zero income tax state and assuming she paid no state sales taxes or property taxes (i.e. no deductions what so ever) and assuming no penalties for not filing quarterly estimates, then the tax would be $2,063. That is divided out $1,228 for self-employment tax and $835 for federal income tax. Running the forms is not difficult or even time consuming. There are calculators on the internet that are accurate enough for estimates. For example this one: http://www.dinkytown.net/java/Tax1040.html
HTH
Z