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Last edited by oodlesofnoodles; 04-03-2009 at 02:12 PM. Reason: eh





^^^ If you have received a W-2 report of employee income from a club, you have been forced to join the ranks of 'statutory employee' dancers. This basically places you between a 'rock and a hard place'. Based on the info you provided in your post above ...
Your earnings during the week must be treated as employee earnings. Your W-2 wages and associated tips get reported on the 'wages, tips ...' line of a standard 1040 tax return. By the letter of the law, tips are supposed to be reported (and turned into) the club on a nightly basis, which then get paid out again to the employee dancer at the end of the pay period after the club's payroll system has extracted tax withholding. However clubs shy away from following the letter of the law since they are also required to pay unemployment insurance, workmen's comp insurance etc. for tip income dancers report. As an 'employee', you cannot deduct the cost of tipouts. Thus the amount of tip earnings for these nights over and above the amount the club reports on your W-2 fall into a gray area to say the least. Legally, it was your responsibility to report these tip earnings to the club on a nightly basis. Since you didn't do so, if audited this can be interpreted as wilful under-reporting of income. Claiming this tip income elsewhere on your tax return is better than nothing, but technically fraudulent.
Because of the unique structure of your club, your friday and saturday night earnings would appear to fall under 'independent contractor' business activity ... which gets reported on Schedule C. Reported business income on Schedule C has no linkage to W-2 employee income reported on the 1040 form. And as an 'independent contractor' you CAN deduct the cost of tipouts.
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