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Thread: Taxes

  1. #1
    Featured Member exotica268's Avatar
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    Default Taxes

    Okay, so I've read over numerous posts on here about taxes, how much to claim, etc.

    My question is...I know that indep. contractors are supposed to pay quarterly. However, what months do we pay and who do we pay? Do we just send in a check? Like...should I pay every April, July, October, and January?...or do I start counting from a different month?

    How much do I pay? I've heard estimates of 30% of my income...so do I just set aside (as someone mentioned in a post) 30% of what I make each night to pay?

    Sorry for the all of the questions. I feel like I've read many threads, but still don't know very much. I've also asked several dancers how they handle their taxes...and either they don't or some clubs actually give them paychecks bi-weekly.

  2. #2
    Banned Melonie's Avatar
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    Default Re: Taxes

    The estimated tax due dates are April 15th for January through March income taxes, June 15th for April and May income taxes, September 15th for June, July and August income taxes, and January 15th for September, October, November and December income taxes.

    The IRS has a form called 1040-ES which you fill out and send in along with your estimated tax payment checks.

    As far as de-facto federal tax rates go, typically every independent contractor must pay 15.3% of their income toward Social Security / Medicare tax (a.k.a. self-employment tax). Additional income tax will be due based on progressive IRS tax rates which start out very low i.e. 10% but increase rapidly as your income increases. Business expense tax deductions of course serve to lower the amount of income that the income taxes are calculated on. All told, the effective federal tax rate for a dancer can range anywhere between 20% and 40% depending on how much money she earns, how many business expense deductions she takes, her marital / filing status, children / dependents etc.

    Also don't forget that if you live or work in a state that has a state income tax, you'll also need to fill out estimated tax forms and send in estimated tax payment checks to the state tax agency as well !


    I've also asked several dancers how they handle their taxes...and either they don't or some clubs actually give them paychecks bi-weekly
    well, in either case, these dancers are receiving income that they are not declaring to the IRS (surprise surprise). Besides the potential IRS issue, not reporting or underreporting income also has negative effects in the mainstream financial world. Because everything financial is linked these days, income that has not been reported to the IRS does not officially exist in the eyes of banks, finance companies, credit rating agencies etc. Also, these days, large cash transactions must be automatically reported to the IRS by banks, car dealers, brokerage firms etc. Thus having thousands of dollars in cash stashed in your mattress is of extremely little value these days, unless you plan to spend it on 'useless' stuff that costs less than $3,000 / $10,000.

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    Featured Member exotica268's Avatar
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    Default Re: Taxes

    Thank you for the info, Melonie!

    So lemme just get this straight; paying quarterly taxes is not FILING taxes, right? FILING is what you do at the end of the year to basically tell them that you've paid your taxes, etc. In that case, if the latter is correct, how can they say that I owe more or less? How do they know?

    For instance...hypothetically speaking...say I live with my boyfriend in his house that he owns, he buys my food, toiletries, clothes, etc. This is actually mainly true except for the clothes part. But basically, I'm asking, without a paper trail, how can the IRS say that I made MORE than the amount that I put into my savings account or LESS than that amount?I don't really live even a moderatly expensive lifestyle. I have a cheap car that's just about paid off, cheap insurance, and never buy expensive name brand products of any sort. I'm basically asking b/c I don't want to try to do something right (pay taxes), and end up being accused of doing something wrong and having to pay extra.

    Also, I don't really work that much...but I guess the IRS doesn't have to know that I'm a dancer. For all they know, I could be a part time dog groomer who goes around to established clientele's houses. Would they ask for proof of that? Here again, I'm just worried that if they ASSUME that dancers make alot, it's going to look like I'm underreporting b/c I only work usually a max of 2 days, some that are good and some that are bad.
    Last edited by exotica268; 03-06-2008 at 11:34 AM.

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    Default Re: Taxes

    You still file at the end of the year, in April. If your payments are more than what your return shows you owe, you get a refund. If less, you owe. Just like people with withholding on paychecks.

    For what it's worth I know a handful of dancers who have been audited after outrageous cash purchases. I think if you're keeping up with your quarterly payments and maintaining good records you minimize the risk.

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    Featured Member exotica268's Avatar
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    Default Re: Taxes

    Quote Originally Posted by Susan Wayward View Post
    You still file at the end of the year, in April. If your payments are more than what your return shows you owe, you get a refund. If less, you owe. Just like people with withholding on paychecks.
    ^ That's the part I don't understand. How do they determine if I paid too much or too little without a paper trail and without them knowing my specific circumstances?

    Also, another question: If, during the year, I make less than a certain amount (say...$3000), is it true that I don't have to pay taxes? Or is that only if I'm still considered a dependent?

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    Default Re: Taxes

    Do I get tax info from my club (providing that my club does indeed issue earnings info) before I need to file my quarterly?

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    Banned Melonie's Avatar
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    Default Re: Taxes

    ^ That's the part I don't understand. How do they determine if I paid too much or too little without a paper trail and without them knowing my specific circumstances?
    think of it this way. Employers make estimated tax payments to the IRS on behalf of their employees 52 times per year. The amount that is withheld from each 'employee's weekly paycheck is an estimate. The estimate is based on little more than intelligent guesswork. Then once the year is over, each employee files a tax return which includes a lot of things which are now specifically known instead of estimated i.e. the actual total amount of money earned throughout the previous year, filing status, exact amount of tax deductions etc. The tax return based on specific figures results in a calculation for the exact amount of taxes that are due. If the total amount of the 52 weekly estimated tax payments is more than the actual tax due per the tax return, the person gets a refund. If the total amount of the 52 weekly estimated tax payments is less than the actual tax due, the person has to pay in the difference.

    There are only two differences between employee paycheck withholding and independent contractor estimated tax payments. The first is that where employees are concerned the employer withholds the money and sends it to the IRS on behalf of the employee, whereas an independent contractor has to withhold the money and send it to the IRS themselves. The second difference is that an independent contractor only has to make 4 estimated tax payments over the course of a year, whereas the employer has to do it 52 times or 26 times or 12 times depending on how often paychecks are issued.


    Do I get tax info from my club (providing that my club does indeed issue earnings info) before I need to file my quarterly?
    no. Any tax info coming from a club will very probably only show up in February of the following year. Also any tax info coming from the club will very probably NOT include tip income. And of course many clubs don't provide any form of tax info.


    Also, another question: If, during the year, I make less than a certain amount (say...$3000), is it true that I don't have to pay taxes?
    Social Security and Medicard taxes will be charged all the way down to the $700 per year threshold for mandatory filing of an income tax return. However, you probably won't have to pay any significant amount of INCOME tax until your earnings start approaching $20k per year. The reason for this is that every person gets an exemption and a standard deduction which subtract from their gross income before income tax liability is calculated.

  8. #8
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    Default Re: Taxes

    Quote Originally Posted by exotica268 View Post
    ^ That's the part I don't understand. How do they determine if I paid too much or too little without a paper trail and without them knowing my specific circumstances?
    They dont. If there is no papertrail and no large purchases and dont put it in the bank then they DONT know how much you made.

    Now, you go out and pay cash for a $10,000 car you better have calculated that amount as imcome when you go do your taxes...

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    Default Re: Taxes

    If you get a receipt when you pay your house fees you could use those to justify you don't work that much. Of course you could have always just have thrown them away before showing the IRS in case of an audit, but if you always work say friday and saturday and have ALL those receipts and your income for those days in your records isn't outrageous (like it would be if you worked 3 days and just tacked it on to say saturdays earnings) then that would help your reliability.

    Of coarse your spending would need to equate with your earnings. But having all those receipts and records can only help you with the IRS.

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    God/dess Zofia's Avatar
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    Default Re: Taxes

    Quote Originally Posted by exotica268 View Post
    ^ That's the part I don't understand. How do they determine if I paid too much or too little without a paper trail and without them knowing my specific circumstances?
    The IRS has developed a data base of what various occupations pay. If they think you are under reporting, or not reporting at all, they can, and have, taken the average of what every taxpayer in your occupation makes and apply it to you.

    Also, another question: If, during the year, I make less than a certain amount (say...$3000), is it true that I don't have to pay taxes? Or is that only if I'm still considered a dependent?
    Here is a calculator to help you see what your tax obligations might be. Remember, this is for federal taxes, your state, if it has an income tax will also need to be paid.

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    Default Re: Taxes

    that calculator is the shizniz!! thanks for posting that!

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    God/dess anomar's Avatar
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    Default Re: Taxes

    Man, I'm trying to get my shit together to send to my cpa and it's stressful. I kept really good records of how much I earned until I went to Guam. Well since I have a shift by shift breakdown for every day UNTIL then, then I will think that I can count my bank deposits at that time as legitimately traceable income.

    Sigh... now I have a Real Job (crunching the figures, I'm not doing that bad now) and they take the taxes out for me. What a nasty shock!

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    Featured Member exotica268's Avatar
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    Default Re: Taxes

    [quote=Zofia;1435616]The IRS has developed a data base of what various occupations pay. If they think you are under reporting, or not reporting at all, they can, and have, taken the average of what every taxpayer in your occupation makes and apply it to you.



    That's what I don't understand, too. How can they, first of all, know for sure that I am a stripper when I just say "entertainer"? Second, given that some of us work only 1 day per month, possibly, while others work 5 days per week...how can they possibly say when someone is over/underreporting since there's no papertrail? It really scares me to think that they can say I'm underreporting and make me pay more when I really only MAY make $1000 in 3 months...just b/c work either sucked or I chose not to work!

    I realize that the IRS can try to argue...but would they get very far, considering they have no substantial evidence?

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    God/dess Zofia's Avatar
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    Default Re: Taxes

    Quote Originally Posted by exotica268 View Post
    Quote Originally Posted by Zofia View Post
    The IRS has developed a data base of what various occupations pay. If they think you are under reporting, or not reporting at all, they can, and have, taken the average of what every taxpayer in your occupation makes and apply it to you.
    That's what I don't understand, too. How can they, first of all, know for sure that I am a stripper when I just say "entertainer"?
    A Revenue Agent visits your club and asks, oh so nicely, for the names and social security numbers of all employees and all records for all independent contractors who have worked there during the tax year in question. Your club, not wanting to be shut down immediately for immigration violations, complies. The Service now knows you worked at a certain club, and generally how often you worked during the tax year in question.

    Second, given that some of us work only 1 day per month, possibly, while others work 5 days per week...how can they possibly say when someone is over/underreporting since there's no papertrail? It really scares me to think that they can say I'm underreporting and make me pay more when I really only MAY make $1000 in 3 months...just b/c work either sucked or I chose not to work!
    You better hope you or your club has records to substantiate your work schedule, because the IRS will presume you were a full time employee.

    I realize that the IRS can try to argue...but would they get very far, considering they have no substantial evidence?
    Yes they will prevail. This isn't the first time they've heard your argument, and it has failed many times before. To make a long story short, if you and the IRS disagree over an assesment, you have two choices. First, pay the tax and sue the IRS for a refund in U.S. District Court, or, second, go to U.S. Tax Court and contest the assesment. In either case, the legal burden of proof is on the taxpayer, not the Service.

    XOXO
    Z

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    Banned Melonie's Avatar
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    Default Re: Taxes

    I realize that the IRS can try to argue...but would they get very far, considering they have no substantial evidence?
    building on Zofia's comments ...

    where civil and criminal law are concerned, you are considered to be innocent until proven guilty. This does NOT apply to tax law !!!!!!!!! If, for whatever reason, the IRS gets it in their heads that someone is underreporting their true income, and the IRS then issues a 'deficiency notice' to that person based on IRS estimates of a higher income level, it is really left up to that person to prove that they did NOT earn the amount of money that the IRS is claiming they did.

    In the absence of authoritative 3rd party income reporting (i.e. employee W2's, 1099's for misc income payments to independent contractors), essentially every other stick of 'evidence' is the result of self-generated financial records. Those self-generated financial records are not backed up by anything other than the word of that person. Thus if the IRS is given reason to question the word of that person, self-generated financial records are probably going to be regarded as nothing but a self-serving work of fiction. From a standpoint of District Court / Tax Court, this will be portrayed by the IRS as simply being a variation on the good ol' 'business keeping two sets of books' ... but in this case there isn't any 'genuine' set of books only the 'doctored' set.

    Bottom line here is that IRS attention will be drawn by automatic transaction reports it receives, suspicious financial activity reports it receives etc. As soon as that happens, the IRS will send out an inquiry on the financial network for all info listing a person with a particular SS#. Ten minutes later the IRS will get back complete bank transaction records, complete credit card transaction records, complete investment / retirement account records, complete records of tuition, student loans and student grants, consumer loan details including monthly payment amounts and outstanding balances, etc. The IRS will then add up how much money 'went out' through all of these accounts, and will compare it to the tax return showing the amount the taxpayer claimed 'went in' in the first place as well as to the average cost of living in that person's zip code area. If the amount of money that 'went out' is more than the amount the taxpayer claimed 'went in' ... minus additional money that 'went out' to cover general cost of living, the IRS is virtually guaranteed to assume that the person has underreported their true income.
    Last edited by Melonie; 03-07-2008 at 04:25 PM.

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