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January 15th?
Yes, it's another independent contractor question. (Insert collective groan from the knowledgeable folks.) There's a bigass sign in my club that explains how all of the dancers are independent contractors and that information is sent to the IRS on a quarterly basis, then it gives the dates. One of them is January 15th. So, what do I need to be doing? Is this the date I should have my stuff ready to send out? Or is this the day I go to the club and pick up my forms to take them to an accountant?
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Re: January 15th?
Jan 15 2005 is the day your 4th qtr 2004 estimates are due. Your 2004 taxes are not due until Apr 15th 2005, along with your 1st qtr 2005 estimate payment.
The real questions are ....Does your club report (on 1099 forms) YOUR tip income? Does the CLUB send your income info to the IRS quarterly or does the sing mean YOU should make quarterly estimate payments?
In many clubs with IC dancers, the CLUB never sees (or counts) your income and therefore is not responsible for reporting YOUR income to the IRS. This gives you some uhhhh latitude in the way you report your income so FIND OUT.
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Re: January 15th?
If the club has posted a sign this prominently, I would take this to mean that the club is going to send in a 1099-misc form to the IRS for every dancer at the end of January. It's very likely that the club is going to attempt to take a tax deduction for itself for all moneys it paid out to dancers over the course of the year. This would typically mean that if the club charges guys say $20 per private dance and then pays the dancer $10 of that money as a "commission", that her 1099 form is likely to show all of the $10 payments made by the club to the dancer throughout 2004. Same is likely to apply to any champagne room "commissions" paid to the dancer by the club. However, unless your club has a tip sharing arrangement, the 1099 form sent in by the club will not include stage tip money paid directly to dancers by customers. However, the IRS will expect the dancer to report some amount of tip earnings in addition to the 'official' earnings the club reports with the 1099 form.
In regard to estimated taxes, because you are considered an independent contractor, the IRS expects you to estimate your income every three months and send in a check for the taxes due on that estimated income. Estimated tax payment checks are/were supposed to be sent in on April 15th, June 15th, Sept 15th and Jan 15th for the previous 3 month's incomes respectively. From your comments I take it that you have not been doing this ?
Bottom line here is that if you receive a 1099 form from the club in your mailbox at the end of January 2005, you'll know for certain that the IRS has been informed that you have been working at a particular club in 2004 and that you have earned X amount of income at the club for private dances and champagne room. You'll have to file a tax return in April 2005 and pay tax on this reported income (plus some additional tip income not reported on the club's 1099), or rest assured that the IRS will eventually be knocking at your door. If you have not been sending in estimated tax checks every three months to the IRS throughout 2004, you will of course have to pay the taxes due on all of your 2004 earnings in April 2005. It's also highly likely that the IRS will assess a penalty for failure to pay estimated taxes every 3 months, which could add 10% to the size of the check you'll have to send in with your tax return in April 2005.
PS if you live in a state which has a state income tax, the same things are supposed to happen in regard to making estimated tax payments to the state tax agency.
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Re: January 15th?
No, Melonie, I've previously worked in clubs that do not file taxes for us at all. I've been "working under the table" so to speak. This is the first time I'll be doing a 1099, ever.
Thank you so much for replying. So I should keep the 1099 and get an accountant and have my forms mailed ou by April. Managers do a shitty (nonexistant) job of explaining this to dancers.
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Re: January 15th?
If you are going to have significant tax liability for 2004 (If the 1099 you are going to recieve shows $15,000 or more) then you should make an estimated payment on Jan 15th 2005 to avoid penalties when you file the final 2004 return on Apr 15 2005.
In defense of Managers ..... most dancers have NO clue or desire to understand taxes or finances. When a Manager tells them they have to PAY Taxes its like he is stealing the money from them himself. (The "kill the messenger" syndrome) The ladies here at SW are, for the most part, exceptions to ths however.
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Re: January 15th?
If/when a club issues 1099-misc reporting forms to dancers and the IRS, paying taxes is no longer "optional" ! IRS computers read in the dancer's social security number and amount of reported income from the club's 1099 form, and then cross-check to see that a tax return showing at least that amount of income is filed by a person with the same name and social security number as was listed on the 1099 form. If no matching tax return is found, or if the amount reported on the tax return does not cover the amount reported by the club on the 1099 form, stand by for an audit/investigation.
As club earnings potential has fallen, club owners are turning to their accountants to find ways to increase the club's after-tax earnings. An obvious and easy way to do this is to officially show the amounts of money that the club had paid out to dancers over the course of the past year, thus allowing the club to write off the dancers' portion of private dance and champagne room money as a business expense tax deduction instead of the club having to pay taxes on the entire amount the customer paid to the club for the private dance or champagne room trip. This of course merely transfers the tax liability for the dancer's portion of this money from the club to the dancer herself. But it is highly likely that more and more clubs will be going the 1099 route in regard to money they later pay out to dancers for the dancer's share of private dance and champagne room money paid to the club by customers.