As a dancer working strickly on tips only, is it mandatory by law to pay taxes on that money. As far as my club says, I am not an employee. If so, why don't many dancers do it? Also , how is it done?
thx:O
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As a dancer working strickly on tips only, is it mandatory by law to pay taxes on that money. As far as my club says, I am not an employee. If so, why don't many dancers do it? Also , how is it done?
thx:O
yes, you have to pay tax on all income, even if you're not an employee of the club. the only difference is that you are supposed to do it yourself instead of having an employer withhold taxes for you. Every quarter, you send money into the IRS based on what you made.
why so many dancers don't do it? The same reason they don't buy health insurance but have $600 handbags....they look at the short picture. What feels good now....while they may fantasize about retirement or a house, they never make a real plan for it because it would mean discipline.
So as long you're going to be irresponisble, might as well live under the radar. It's much cheaper to not pay taxes...who really wants to pay taxes, right?
But me...I don't want to be the 40-year old stripper who doesn't have a penny to her name and is stuck in some seedy club.
Do dancers usually report every cent they make to the IRS or just whatever they choose?
Danielle -
All taxpayers are required to report their income (and by default that means all their income). After reporting your income you are allowed to claim deductions, both business and personal as allowed by the rules and regulations along with personal exemptions. This leads to taxable income and for federal purposes, a tax is calculated based upon your taxable income.
For self-employed dancers, there is also the self-employment (Social Security and Medicare) tax that is added on top of the regular income tax.
As an independent dancer, you should begin some tax planning/projections so you understand the burden of the tax collector. You should either personally research or hire a competent advisor to help you locate the allowed and allowable deductions, exclusions, and exemptions in order to lower your taxable income.
Failure to file a tax return or fraudulently preparing a tax return can have grave financial and legal consequences. Many people can not have a bank account, credit card, a car loan, or a home because they haven't filed their taxes and hence have to live in an underground situation.
Taxes can be both a finanical and emotional burden and surprises are difficult to deal with. Better planning leads to a successful conclusion.
If I can be of further assistance, please let me know.
Regards,
Dan
well, you are on the honor system, but the IRS has ways of finding stuff out....and what most dancers do isn't really the best option. Most dancers also don't have a house or enough money to retire.Quote:
Originally Posted by danielle1
^ And, the ones that do have enough...but have not paid taxes will find Mr. IRS knocking on the door with a hefty bill a few years down the line.
Thank you everyone who has replied! I have another question...how do they know the money isn't from family, gifts, holidays, anniversaries, financial help from family, etc?
they don't know, but if you ever get audited, you will have to prove it came from those sources.
Danielle, it basically boils down to the fact that computer technology and communications technology have now provided the IRS with the ability to monitor both sides of the financial equation i.e. income AND expenditures. The IRS obviously gets automatic reports on interest payments made to a particular persons' bank account, investment account, retirement account etc. The IRS also gets reports of any cash transaction over a certain threshold amount, reports of property deed registrations, reports of car/boat registrations, college tuition payments etc. The IRS also maintains a database of the typical costs of living for every different zip code, thus generally has an idea how expensive food, rent, utilities etc. are in that particular area.
The IRS computers then put all of the pieces together. If the income side of the equation i.e, your tax return (or lack thereof) does not jive with the expenditure side of the equation (i.e. the car you just bought, the college tuition you just paid) then red flags go off. If you attempt to involve another person in explaining the imbalance i.e. mommy and daddy gave me money and/or paid my tuition, then the IRS computers start grinding on THEIR tax return and expenditure data.
As Emily said, if you are ever audited, which happens to 1-2% of us every year at random, with increasing odds of an audit if the IRS is involved with a club income investigation, a club credit card charge investigation etc. which might turn up your name in club records, then the IRS is in the position of estimating your income and sending you a bill for the unpaid taxes on their estimated amount. Unless you have the documents to prove that the IRS income estimate is wrong, you may be stuck big time. After all, dancers in NYC and Vegas and wherever keep telling news reporters that they're earning $1000 a night, and at least a few people at the IRS read the news !
I am audited almost every year for the last five or so years and everything has been cool mostly just minor mistakes which they dont really get upset about honest mistakes , but if you are screwing them over and they catch you watch out !!!
Yes it can be ugly when the IRS catches someone who has not reported or paid taxes for years. It would be difficult for the IRS to find out without some sort of paper trail. They only have what is reported to them. If you do not get a W-2, 1099, or bank substitute form, then the IRS probably will not have a record of the income. I recently had a client who is a doctor who had not filed for 12 years. He had been making a 7 figure income and had not reported anything. The IRS did not catch him. He only had to file because a bank wanted current tax records for a loan. I have several dancers that have me do their returns. Many times a dancer with children can even get a refund without paying anything in due to EIC. Having a CPA or EA prepare a return will lessen the chances for an audit.
hrb0, I don't want to pry into a client/accountant relationship, but by chance did the IRS latch onto the doctor in question because of a new home purchase, new car purchase, or some other major expenditure which set automatic 'expenditure' reports to the IRS in motion ? I agree that before 2001 about the only way the IRS had to be informed of a person's income was automatic income reporting i.e. W2's, 1099's etc. But since 2001 there has been an ever increasing amount of automatic expenditure reporting, and reports of large expenditures in the absence of a tax return on file showing a matching amount of income to support such large expenditures will definitely wave a red flag.
Actually he was trying to purchase a new home for a 3.5 million. The bank wanted to see the last two years returns as proof of income since he did not have any W-2's. The IRS found out only when he filed. He could have just taken the 1040's to the bank and not mailed them to the IRS. It is true that the IRS probably would have caught something when they received the mortgage statement from the bank showing a lot of interest paid by someone who was not reporting any income. Since he filed before he was caught I was able to get the IRS to forgive the penalties involved.
All of your replies have been so helpful so I wanted to thank everyone for their contributions, suggestions and advice;D Loving you all, Danielle