What do you deduct this time of year?
Implants, Tanning Sessions, Hair, Costumes, etc.
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What do you deduct this time of year?
Implants, Tanning Sessions, Hair, Costumes, etc.
You really need to check with an accountant in your area. I deduct anything that I feel I can justify to the IRS if there was an audit. As far as plastic surgery and implants there is supreme court precedence on this subject. If your implants are smaller than 1000 cc per side they cannot be deducted, only 1000cc and larger are considered a career move. Other plastic surgeries are questionable as well. Pretty much if you benefit from a cosmetic item outside of your career you probably can't deduct it. I do deduct my nails and pedicures, I also deduct my personal trainer as well as my gym membership. I never had any of these before I started dancing, and don't use them when I am not working. Well, okay, I still go to the gym, but I don't exersice with the same intensity as when I am dancing, and therefor could probably get the same workout at home.
Anyway, you really need to talk to an expert on this. There is lots of stuff self employed people can deduct that those with regular jobs cannot. Make sure you use an accountant who has expierence with entertainers, or maybe one who works for the clubs. You need to know that you can also deduct your tip outs, as well as your stage fees. I usually never include this in my gross earnings, but many clubs send you statements at the end of the year of stage fees paid etc.
Yes i have deducted alot when i first started dancing. Then when i found an accountant who knew what he was doing, he told me not to deduct everything under the sun, only items i really need for my job. because i may set my self up for an audit. Thats what i was told, so i have been very carefull. No problems. And i always recieve a statement at the end of the year. I think the key is to find a great accountant, and explain all your deductions to him/her.
Pamela
Common expenses entertainers that are deductible:
beauty supplies (make up, lotion, perfume, nail polish, body spray, mints, etc etc)
shoe/costume repairs and dry cleaning
music
parking/tolls
mileage (be prepared to have proof or a reasonable basis for estimating)
tip outs/stage fees (I have yet to meet a girl who knows how much dancing costs her in this area, have a reasonable basis for estimation)
hotel room (business trips only)
aspirin/tylenol
purse/gym bags
wigs/costumes/shoes
Things that may be deductable depending on your situation I wouldn't put on a return:
meals & entertainment - business trips (I might include some but would not include most)
pet snakes or exotic animals
birth control
home office/studio expenses
cosmetic surgery (I would like to see proof of the '1000cc rule')
in regard to the "1000cc rule" ...
Several years ago congress passed a law which removed the ability to include the costs of plastic surgery as a medical expense deduction, on the basis that it was not a necessary procedure and that the person getting the plastic surgery benefitted from it personally. This law effectively removed plastic surgery dedutions entirely at the time.
A feature dancer named Cynthia Hess (a.k.a. Chesty Love) had very large breast implants which were integral to her ability to feature. She therefore challenged the IRS interpretation of the plastic surgery law in IRS tax court in an attempt to deduct the high cost of getting and maintaining her implants as a business expense. The point made before the court which swung their decision in her favor was that her very large breast implants were NOT personally beneficial because they were so large that they actually caused problems in her everyday life through unwanted attention, circus freak reactions etc. The ONLY benefit which they provided was related to her business. The court agreed, and ruled that Cynthia was entitled to deduct the cost of her very large implants as a business expense. Anyone can consult the IRS Cynthia Hess Letter Ruling for more details.
As my accountant explained it to me, the 1000cc cutoff is not cast in stone. What is important is that the implants must be larger than off the shelf implant sizes available to housewives who clearly choose them with no business purpose in mind. Since the largest catalog implant size is 850cc, it has to be above that or the IRS can disallow the deduction on the basis that the girl got them for her own personal benefit and not strictly for business reasons. This is the same logic which allows me to write off stage costumes but does not allow me to write off bikinis even though I wear them on stage (because the costumes are only useful for business but the bikinis could be worn at the beach!).
My accountant thinks that if a girl is a dancer, a waitress, a barmaid, an actress or model, and if she decides to get 850cc implants the deduction would probably fly - particularly if she actually has 1000cc put in them! But he's quite sure that a dancer deciding to get 400cc implants just like 100,000 housewives would clearly fail the deduction test in an audit on the basis that these implants were personally beneficial and not large enough to have any major business impact (not big enough to feature or draw undue attention). He also feels that such attempted deductions as tanning, health clubs, weight loss programs, hair and nails etc. would fail the deduction test in an audit for the same reason because they are personally beneficial and because housewives also do all of these things with no business related reason.
My accountant tells me that the 'housewife test' principle applies to every deduction a dancer might think of taking. I can deduct makeup items which are clearly theatrical, but not everyday makeup housewives would also buy at WalMart. I can deduct 6" heels and thigh high boots but not low heels or sneakers even though I wear them too on stage sometimes, because I could also wear the low heels and sneakers on the street.
In regard to the more conventional business deductions such as tipouts or mileage/hotel/airfare or home office/computer/ my accountant was very firm in reminding me that these are ONLY deductible if I work as a private contractor, receive only 1099's and file a schedule C business return. He warned me not to work in any clubs which consider their dancers as employees, pay dancers by check, issue W2's etc. IRS code only allows "employee business expenses" to be claimed by dancers who are working as employees, which is basically limited to costumes and shoes and does NOT allow travel expenses, or stage fees or tipouts to be deducted (this is why it's now illegal for California clubs to charge them). In fact, my accountant ordered me NOT to work in the state of California at all since the new law went into effect because the new law considers ALL dancers to be employees. According to my accountant, the IRS has a huge problem with anyone trying to file under more than one classification, thus if any club were to issue one W2 in my name proving I had worked as an employee, the IRS could challenge all of my private contractor deductions resulting from other clubs where I had worked claiming I was also working as an employee for the other clubs.
I am both an employee and IC at different strip clubs. Never had a problem, then again i don't try to write off my eyeshadow. Common sense, and a good accountant can take you far when you have to pay uncle sam. Alot of people don't know the ropes of being an IC, and get confused. There are many good books, "Income tax for dummies"...believe it or not is great to get started. Read, and save those papers everyone handed to you that is work related. Pamela
The sometimes employee, sometimes IC issue is not really a big deal for the IRS. You report your W-2 earnings on line 7 and take the few allowable deductions on Schedule A of the 1040. For your 1099 income, you report that on Schedule C if you do not have an LLC, Sub-S Corp or Sub-C Corp, and take the more generous deductions on Schedule C or C-ez. You file the Schedule C along with your 1040 and report the income or loss on line 12. It is a hassle and definitely worth paying an accountant to do the work. That frees you up to do what you do best.
I understand that it's not SUPPOSED to present a problem, and I know how to file employee wages versus business income. My point is that, if audited, it's entirely within the IRS's realm of possibility to question the legitimacy of a girl's independent contractor business income, to contend that she is or should be considered an employee at ALL the clubs she worked at since one or more clubs considered her as such and she basically did the same work at other clubs, and that therefore the IRS is within its rights to reject ALL of the business expense deductions she has tried to claim. This happened more than once to girls during audits last year. From what I understand it resulted in settlements - the girls had some business expenses disallowed. Undeniably it is one reason among many other possible reasons for the IRS computers to put up an audit flag.
Where the state of California is concerned, the new state dance club law comes right out and says that ALL dancers in the state of California are to be considered as employees! How does a girl protest to the IRS that the Spearmint Rhino that she danced at in California that considered her an employee is somehow different than the Spearmint Rhino she danced at in any other states, or other chain clubs in California or other states ? Pandora's box has been opened! THIS is the reason that my accountant "ordered" me not to dance in California since the new law went into effect.
Given the opportunity, California would consider over 70% of the people who are considered "outside contractors" as employees. Don't let this scare you, this is more the employer's problem than the employee/contractor's problem. The state does this so they can generate state unemployment, state disability, and state income tax revenue.
If you work for more than one club and provide your on supplies (the club doesn't offer you any benefits) that it should be difficult to prove your an independent contractor.
Melonie,
Like socks said, it's more of an employer problem than an employee problem. In any case, I've checked this out with a CPA and he assures me that there is no problem with doing split status. In fact that is precisely what the Tax Code contemplates for this situation. In any case, I'll let you know if I get audited for this tax year, as I am having split status for the first time. But honestly, my CPA and I went over all these issues last summer when I took my current job and he just didn't see any real problems.
Z
well I certainly hope that your CPA is right. Personally, I have too much at stake in business deductions to even flirt with the issue of split status. It also doesn't really matter to me if I make a west coast road trip or not, because club income potential without major mileage isn't what it used to be, particularly in "feature" clubs like Market Street Cinema. Hopefully nobody that posts here will wind up being audited in order to provide a definitive answer.
The only real problem I see in filing a Schedule C and regular wages is in deducting expenses. To deduct expenses incurred in working for the the company you get the w-2 from you have to file Form 2106 which is a sub-form of Schedule A (meaning you can't deduct them unless you own a home or have a lot of expenses - keep in mind you can't deduct any expenses your employer reimburses you for such as parking).
I am not sure how the IRS would disallow expenses in such a case but be aware this is a questionable way of filing is acceptable.
If a club classifies their dancers as emlpoyees and you work for various clubs or as an entertainment agency you can, upon accepting employment (or just ask at anytime), request that you be hired as an independent contractor.
That said, if you're only working for one club or an unrelated second job then you really are an employee no matter what loop holes may currently exist.
Absolutely, but you seem to be missing my point, Socks. I usually dance all over the place during the course of the year and wind up doing not only a complicated federal tax return but returns for several different states as well. This means that I have MAJOR travel and accomodation expenses which I want to deduct. My accountant's bone of contention is that travel and accomodation expenses are deductible as a BUSINESS expense, but they are not deductible as an EMPLOYEE expense. By logical extension, this means that if California law says ALL dancers working in California are employees and not independent contractors in business for themselves, that any travel and accomodation expenses I incur by travelling to California to dance may be thrown out the window as a deduction on my California state return, and by cross-reporting, on my federal return! I totally agree that if a girl is working at one or two clubs within driving distance of her home that this point doesn't matter much. However, if the travel and accomodation tab adds up to several grand a year it matters a lot! This also potentially opens the door for the IRS to say that other places where I danced "should have" treated dancers as employees (even if they didn't in point of fact), putting other BUSINESS expense deductions which are not legal EMPLOYEE expense deductions at risk.
Socks & Zofia: As a Club CFO I agree that the responsibility to determine job status is the Clubs rather than the Dancers, it is the Dancers ultimate responsibility to file and pay income tax on her earnings. If it's the money thats the bottom line, then all responsibility for that is with the dancer. The only financial responsibility the Club incurs is the 50% FICA and FUTA contributions. Penalties are individual responsibilities and can amount to more than the tax liability.
No matter if you are considered an employee or an independant contractor... ALL dancers should file 1040A rather than 1040EZ. 1040A allows you to deduct on an itemized basis as well as file a Sched. C if needed. Dancers are always better off to file Sched. C even though it does involve Self Employment Taxes and Alternative Minimum Taxes.
The best way to document any deduction is to have the Club require that you have "it". Expenses/Items required by an employer or under contract are legitimate and seldom questioned by the IRS. This includes Implants of any size as well as shoes, costumes, makeup ect. Many of these items however must be DEPRECIATED rather than deducted (Implants for example) rather than written off 100% in the year incurred. There is little liability for the Club in making such a requirement and most clubs do IMPLY that shoes/makeup and costumes are required as is fitness in general. Implants/plastic surgery is no different and obviously would be on a case by case basis.
Melonie is correct that, for traveling entertainers, the issue of employee vs independant is important but for a Dancer who also has a "job" it's not really an issue anymore. LOTS of employees have thier own small business and any accountant who is current with IRS Interprutations should be aware of this. Only when it involves frequent, extensive travel (long distance and term) does it become an audit issue.
Well put DJ Wolf, I was wondering if anyone was going to bring up the difference between being able to depreciate an expense/purchase and being able to write it off and deduct it.
Excluding any cosmetic surgery or any other major expenditures most other expenses a dancer incurs can be expensed via a section 179 deduction. The amount a business "a dancer" can section 179 is so high a dancer will likely never reach.
Where items that have a useful life beyond a year (clothes, shoes, wigs, music, etc) must always be listed on a seperate form for depreciable property and then expensed. This is more of a technical preperation formality that goes beyond the original topic. I don't think any of the girls here are preparing their own returns.
pardonnez moi ... I just received my TurboTax CD and am waiting for the discs for five different states to arrive. Many of us routinely do our own taxes, out of necessity. There are two huge advantages to doing our own taxes.
#1 familiarity with applicable tax law ... believe it or not, MOST tax preparers and many accountants are unfamiliar with the best legal options for dancers when filing taxes. Choosing to take section 179 first year expenses versus depreciating over several years is a perfect example. Also, how many tax preparers have researched the Cynthia Hess letter ruling from the IRS (if you had, you'd know that all breast implants are NOT deductible as a business expense or business investment, and that liposuction, nose jobs etc. are not deductible at all as a business expense).
#2 the sheer expense ... I'm sure I'm not alone in having income from several businesses (live dancing, modeling, website/webcam) in several states, mortgage and property taxes, investment income, etc. In my own case I also have depreciation, extensive business expenses, even foreign income! My taxes would give an H&R Block preparer a stroke! A CPA could certainly handle my taxes, but at $35+ an hour were talking $1000+ easy on just my 1040! Also, because of the higher risk of audit which goes along with the job classification code that dancers fall under, it's highly likely that a CPA will cover his own butt and argue or refuse to include "questionable" deductions.
Responding to the question about depreciation versus expensing, I depreciate my breast implants, my "business computer" and webcam hardware, my "business vehicle", and my custom made stage costumes. I expense everything else. To make sure the deductions stick, I also own a second "personal" computer amd second "personal" vehicle.
H&R Block is probably the WORST choice a dancer can make to prepare her taxes. Melonie is correct that most individual preparers (Including most CPA's) do not understand the business requirements of dancing. G-Strings and 6" platform heels just are not discussed in accounting textbooks. You can't learn this in school.
Turbo Tax is awesome software and I have used it for my personal taxes for 10 years. You may not know that, as of Jan. 16th 2003, the Government is subsidising self-prep software such as Turbo Tax in an effort to promote electronic filing so online Turbo Tax may be free for you to use this year. Go to Yahoo/finance/taxes to check it out.
Just my personal experience, i would NEVER do my taxes on any one job i had over the web. I like knowing, that someone else is not getting my info who should not have it. And since i run DSL and never shut it off, even though i have a great firewall, i have been hacked into, email and every site i have been too. Thanks for my ISP for telling me there was in fact someone inside my computer, and we changed passwords along with me being told to turn off my computer every night. It's too scarey for me to put my money up for eyes on the web. I am just speaking of personal experience. Not to scare anyone. Just to keep in mind ALOT of people are out there who can get in for reasons...just because they can.
If they can get into NASA, they can get into ours. Question is why? But i still don't want my number figures going out via internet. Thats just me. And alot of people know i dance, and am active in other adult entertainment jobs. Only my opinion...Pamela
And oh Socks, i have a great accountant, who does many dancers in the area, i have to go back down to Lauderdale from up north FL some, it is worth it. I do prepare, and am ready. No doubt about it. ;) and no.. i would never prepare my own taxes.
Pamela: I understand your paranoia but did you ever consider that your accountant probably keeps your records/info on a computer in his office that is more than likely connected to the internet?? Also if you have even applied for a bank loan and presented your Tax Returns as proof of self employment income that info is on the banks computer which is again ...connected to the internet. If they can hack into NASA why can't they just hack into the IRS database and get your return info? Actually the way Turbo Tax works NO actual data is stored on your computer at all. Even the info you transmit to them is ASCI raw data that is useless without the digital form. It's actually a more secure system then the US Mail.
I also was a firm believer in accountants until my old college roomate who is now an accountant for Southwestern Bell proved to me that my accountant was actually using Turbo Tax software to prepare my return. (Many CPA's use the expensive professional version of Turbo Tax) Once I did my own taxes and found out all that my conservative accountant was missing I was sold. The ONLY time I have ever been audited was a year when the CPA did my taxes. Just my experience. YMMV.
I sit with my accountant through the whole process. It is lenghty yes. But worth it to me. I also understand he has a better security wall then i as well. Call him paranoid as well, he has files eveywhere, in cabinets too! And i am well aware whatever is transmitted through my computer stays! No matter where it is going, it is on my hard drive. And no, he does not use Turbo Tax, i am familiar with how the system works. And so you no longer go to a CPA because you got an audit. That is your experience. I chose a different system of filing then the internet. I have been there, as you speak you have had an experience with your CPA, i do NOT call you paranoid for changing to Turbo Tax, from a CPA. Lots of people do not file over the net. My security is not as good, as companies, and people don't know where i file at through an office. and i am speaking of people who know me, can get in...They are in fact called CRACKERS, not HACKERS actually. They got into my comp. MINE. I do NOT like being called PARANOID for a personal decision, and sharing it. As YOU shared yours. Until you crack codes, let it go. My computer was a mess. And my info everywhere. When it comes to sending info via the internet "from my computer," with big $$$ made i won't do it from mine. AGAIN...my decision. I am not alone. I take offence yes. Because i share my thoughts with others. Paranoid was a harsh word to use on anyone for a personal decision.
OK.....Let me re-phrase the first sentence of my post. Pamela: I understand your CONCERN. (Substitute the word Concern for the word paranoia) I certainly did not mean to offend you with my choice of words.
Firewalls: Anyone on DSL/Cable/T1 ect. should have a router (sometimes called a Gateway) between the modem and their computer(s). This is as good a security wall as any Bank or CPA will have. As you noted with the NASA comment they can all be "Cracked". The best solution for those who have sensitive data is to use two computers. One for web browsing and E-mail (where your IP may be broadcasted) and another (which is only connected to the network/internet when absolutely necessary) for the important data such as finances and investments. Many professional investors use this 2 computer network concept to insure maximum security. I personally use this 2 computer system for my investing and business data as well as any online shopping where credit card info is transmitted.
Data Storage: If you research the manner in which Turbo Tax for the Web (Not the CD Version of Turbo Tax) functions you will find that NO Data is stored or saved locally.....NONE. Not even a cookie with your account name/password. You may not want to believe this but please research it before making assumptions that possibly could be incorrect. Many people believe that everything you type is saved but it is not.
Professional Tax Software: Please note that I did not say your accountant used Turbo Tax. It IS very likely that he uses the professional version on which Turbo Tax is based.
Let me clarify that I did NOT change to Turbo Tax because I was audited. I changed because it saved me LOTS of money in both CPA Fees and deductions that my CPA was missing. One of the greatest advantages of doing your own Taxes is being able to "allocate" income and deductions to different catagories that may yeild a considerably smaller tax liability. For people with large non-traceable tip income this is a BIG flexibility that an accountant simply cannot offer you. <-----IMPORTANT for Dancers.
I do understand how violated you must have felt when your computer was "cracked" into. It's a terrible feeling I'm sure and if you feel more secure using an accountant then you are certainly entitled to that option but an accountant is NOT the best choice for most dancers due to that large untraceable income factor as well as the missed deductions. I believe this old saying applies well: "If you want something done your way ...do it yourself".
I second the "concern" about having your home computer hacked. It has happened to me as well on my "business" computer at home which is connected full time to a cable modem, and also has happened many times to my web server! For sensitive financial stuff I have a "personal" laptop reserved for this purpose, and a seldom used second dial-up line for occasional online trades and transfers. Where TurboTax is concerned, I prepare everything locally on my laptop, print out the results, and then I SNAIL MAIL in my returns!