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Thread: Do you *not* pay taxes?

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    Default Do you *not* pay taxes?

    I've heard as an independent contractor, dancers can get away with not paying taxes. Is this true?

    (I am just curious, not considering skipping out)

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    Moderator Aurora_Sunset's Avatar
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    Default Re: Do you *not* pay taxes?

    I'm not a tax expert. I'm sure someone (like Melonie) will be able to answer more in-depth. But to my understanding, sure, you could technically not pay taxes if your club doesn't report your income. However, if you've been putting your money in the bank and supporting yourself/buying expensive things, but you report no income or an income from some other part-time job that's way too small for you to afford such a lifestyle, that's gonna make the IRS go "hmmm." If you paid for everything in cash and lived with your parents or someone else, you might be able to get away with it.

    I think a lot of dancers either a) have another job and report that income, while using stripping money to pay for most things in cash or b) report some of their stripping income but not all so they don't get taxed as heavily. Of course, there are some that pay all their taxes.

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    Default Re: Do you *not* pay taxes?

    It depends on how well you like to sleep. Years ago it was a LOT easier to live an "all-cash" lifestyle and get away without paying taxes. In today's day and age, with all the tools at the disposal of the IRS your chances of getting caught are MUCH greater now than then.

    If you buy a car or anything "big-ticket" chances are you will get caught.

    So much more info gets reported to the IRS now than in the past that it is virtually impossible to get away without paying taxes.

    The bottom line is you are much better off filing a return and paying your quarterly estimated taxes.

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    Default Re: Do you *not* pay taxes?

    The bottom line is you are much better off filing a return and paying your quarterly estimated taxes.
    ^^^ That's a fact ... and not just for potential tax enforcement reasons either. These days, having a 'cash' income as a dancer means almost nothing to a would-be corporate landlord, would-be auto loan or home mortgage lender etc. The reason is that new regulations require that they 'verify' the actual income source and amount. Where self-employed people ( not just dancers but any self-employed business person ) are concerned, the only 100% authoritative proof of income is showing the amount of previous income reported on past tax returns.

    On the other topic of 'back door' automatic reporting, indeed the IRS now receives automatic 'spending' reports from state motor vehicle dept's, state property and other title transfers, college bursar's offices, any retail 'cash' transaction at any merchant that is over $10,000 ( and as low as $3,000 in some US states ), etc.. The USPS even reports any money order purchases over $1,500 ( and many states set the money order reporting threshold as low as $1000 ). The IRS also now maintains a database indexed by zip code in regard to typical 'costs of living' i.e. average rents, average costs for utilities, average costs for groceries etc.

    Using this new data, IRS computers that receive an automatic report that a person just registered a new $25,000 car with a $500 monthly payment, for example, will first look up the average costs of living in that person's zip code area. The IRS computers will then go searching for past tax returns by that person to see how much income they reported as earnings. If it turns out that average 'costs of living' run $1000 a month, and that the new car payment runs $500 a month, but NO income was officially reported on last year's tax return to explain where this $1500 a month is coming from, it's EXTREMELY LIKELY that IRS agents will do additional 'snooping' ( like bank account transactions, brokerage transactions, retirement account transactions, credit card transactions etc. ) to find out how much 'magic money' has actually been appearing from out of nowhere !

    The IRS will then make the logical assumption that, in order to afford this level of 'spending', the person has been earning significant amounts of income from undocumented / unreported sources. As a result, the IRS will very probably come looking for their 'cut' of that undocumented / unreported income ... plus penalties and interest charges. And in point of fact, if the IRS does come looking under these terms, the IRS can 'estimate' the probable amount of unreported income ... at a level that is significantly above the actual level earned ... leaving the person who failed to report their income with the burden of proving that they didn't actually earn the high amount that the IRS is now estimating and attempting to collect taxes on.

    ~
    Last edited by Melonie; 10-05-2011 at 01:00 PM.

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    Default Re: Do you *not* pay taxes?

    Everyone pays some kind of tax.
    "Well done. Here are the test results: You are a horrible person. I'm serious, that's what it says: 'A horrible person.' We weren't even testing for that."

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    Default Re: Do you *not* pay taxes?

    But what if you lived at home and didn't deposit your cash into the bank like Aurora_Sunset said?

    Also one thing I find confusing is that (I'm assuming) they can see that you have a job (as an independent contractor, but still) so wouldn't it seem bizarre to them for you to report that you made $0.00 in a year?

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    Default Re: Do you *not* pay taxes?

    Also one thing I find confusing is that (I'm assuming) they can see that you have a job (as an independent contractor, but still) so wouldn't it seem bizarre to them for you to report that you made $0.00 in a year?
    In the specific case of exotic dancers, the only official automatic income reporting that will find its way to the IRS are club issued 1099-misc forms. Some clubs do issue these for money the club paid out to dancers as a result of customer credit card charges. Thus club issued 1099-misc forms usually do NOT report cash tips and other cash payments directly made from club customers to dancers ( meaning the amount of income reported via the 1099-misc form may constitute less than half of the dancers' total actual dancing income).

    And there are many clubs that don't issue 1099-misc forms to dancers at all. These clubs typically don't directly accept credit cards and steer customers to an ATM, or otherwise force customers to pay in cash. If no 1099 is issued, then the main 'mechanism' by which the IRS is made aware that a particular person does have income and should be filing a tax return is circumvented.

    Again the usual disclaimers about all American independent contractors being legally required to file a tax return if their income, documented or not, exceeds $400 a year. But in real world terms, if no 1099-misc is issued by the club she is working at, and if a dancer chooses to violate the law and not file a tax return, the IRS won't know that this dancer exists ... at least from the 'income' side. Indeed I have occasionally worked with dancers in this situation. And a handful have taken it one step further, by claiming to actually be unemployed and thus signing up for food stamps, medicaid etc. while at the same time earning $1000 a week via undocumented cash income from dancing.

    But as posted earlier, there are also a large number of automatic IRS reporting mechanisms that this dancer could trigger on the spending side. If and when that happens, it will NOT end well. So the theoretical answer to your question is probably this ...

    - if a dancer's income is in the form of 100% undocumented cash thus her club does not issue 1099-misc forms

    - if the dancer never spends more than $3,000 cash on a single purchase

    - if the dancer never opens a bank account and/or never allows the balance to exceed $3,000

    - if the dancer never pays college tuition

    - if the dancer never opens a credit card account and/or never allows the balance to exceed $3,000

    - if the dancer never sets up rent payments to a corporate landlord, utility bill payments etc. in her own name

    - if the dancer never registers a motor vehicle and/or never allows the value of the vehicle being registered to exceed $10,000

    ... then the real world probability of attracting IRS attention will be very low.

    However, it is not zero !!! For example, it's entirely possible for IRS attention to be attracted by the club this 'cash only' dancer is working at ... via the clubowner being audited, by the club being busted etc. If that happens, and if the IRS pulls out the clubowner's file of dancer 'job applications', it's very likely that the IRS will run a cursory check for the existance of past tax returns by the dancers listed in the clubowner's file ... and start digging further if no matching tax returns are found.

    For another example, bank tellers and other workers in the financial industry are under a mandate to fill out 'suspicious activity reports' to the IRS on people making financial transactions of ANY size, or a pattern of financial transactions, that appear to come from 'suspicious' financial activities. I imagine that a dancer making weekly deposits via large stacks of $1 bills could arouse such 'suspicion' in and of itself. So could a dancer making weekly purchases of money orders could also arouse such 'suspicion' ( and the purchase of $1500 worth of money orders at the same time will definitely cause an IRS cash transaction report to be generated ).

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    Default Re: Do you *not* pay taxes?

    it seems to me that if you don't do any taxes at any point. One day the taxman is going to come knocking on your door and you will have A LOT of taxes to pay. I'm probably going to have to give the gvt. minimum 20k when tax time rolls around next year. And that would be okay if I could, you know, take out a line of credit for that... but I doubt I have a good enough credit rating / have no reported assets etc. because it will be my first time declaring an income in a while, let alone one that is worthy of a minimum 10k line of credit.

    fml.

    just also to clarify. If you end up having an ~inquiry~ into your spending / taxes they can do a "forensic monetary assessment" and access all bank info etc. My boyfriend said also that they can assess your "lifestyle", make an estimate and then charge you that if you can't prove it otherwise. I don't know if he is full of shit, half right or completely right but it will come back to haunt you.
    [/center]

    Quote Originally Posted by Laurisa View Post
    Money can't buy happiness, but poverty can't buy shit.

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    Default Re: Do you *not* pay taxes?

    One day the taxman is going to come knocking on your door and you will have A LOT of taxes to pay
    ^^^ and potentially even more taxes than the dancer actually would have legally owed !!! If the IRS does pick up on the fact that a dancer is deliberately not reporting ( or seriously under-reporting ) her dancing earnings, one thing that is guaranteed to happen is that the IRS is going to lose credibility in regard to anything the dancer then attempts to tell them regarding her actual income. This can ... and has ... led to situations where the IRS will 'estimate' that typical dancers working in a particular club appear to be earning $500 a night based on an agent's observations, whereas the particular dancer may only be averaging $250 ... with no way for the particular dancer to absolutely prove that she 'only' earned $250. There is also an issue of how many nights per week the particular dancer actually worked last year, versus the IRS estimating that she actually worked more nights ... with no way for the particular dancer to absolutely prove she only worked 2 days a week. Thus if the particular dancer deliberately chose not to report her $250 * 2 * 50 = $25,000 'part time' dancing earnings to the IRS via filing a tax return, and attracts IRS attention, it's possible that the IRS will attempt to collect taxes due on $500 * 3 * 50 = $75,000 of 'estimated' dancing earnings ... leaving the dancer with the burden of proving that she 'only' earned $25,000 ( which is legally impossible due to lack of authoritative 3rd party income documentation - the 'sword' now cuts the other way ). This would most likely lead to a 'settlement' where the dancer agrees to pay the taxes due on perhaps $50,000 worth of income, in order to avoid expensive litigation, avoid IRS siezure of her assets ( bank balance, car ) etc.

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    Featured Member luscious sadie's Avatar
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    Default Re: Do you *not* pay taxes?

    good to know that my bf was right. You must have responded before I added the last paragraph
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    Quote Originally Posted by Laurisa View Post
    Money can't buy happiness, but poverty can't buy shit.

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    Default Re: Do you *not* pay taxes?

    I'm pretty sure you can get away with not saying *all* the money you earned. BUT you probably have to say a certain amount. I don't know exactly how much you earn but I'm sure you can get away with not filing a certain amount.
    InnesX

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    Default Re: Do you *not* pay taxes?

    I'm almost positive that very few girls report their full income. Just be aware of the fact that you have to be declaring enough that if you want to make big ticket purchases that you're declaring ENOUGH.

    It might be beneficial to make friends with accountants / financial advisors and ask them questions when they come into the club. When I dance for either of those I ask them a few questions and they feel very useful answering.
    [/center]

    Quote Originally Posted by Laurisa View Post
    Money can't buy happiness, but poverty can't buy shit.

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    Default Re: Do you *not* pay taxes?

    as former moderator of Dollar Den, since nobody else has done so, I would point out that US law requires independent contractors to report 100% of their income if it exceeds an annual level of $400. As such, all posters should exercise discretion and differentiate making 'personal comments' about the low real world probability of being caught after choosing to violate this US law, versus 'giving advice' which could encourage someone to violate this US law. This is a potential 'liability' issue for the SW website.

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    Default Re: Do you *not* pay taxes?

    I plan on reporting all my money and paying taxes on all of it. It will be a HUGE cut for me but I have been good with receipts and will likely be able to write 10k off, if not more.

    I am a socialist and wouldn't be able to live with myself politically if I wasn't declaring all of my income and paying taxes on it. As well, I know that if I am wanting to be able to do something like, you know, buy a car or a house, it will be way, way easier with a fully declared income. I also won't have to answer questions and will not have to deal with the CRA.
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    Default Re: Do you *not* pay taxes?

    Quote Originally Posted by legallyblonde502 View Post
    But what if you lived at home and didn't deposit your cash into the bank like Aurora_Sunset said?

    Also one thing I find confusing is that (I'm assuming) they can see that you have a job (as an independent contractor, but still) so wouldn't it seem bizarre to them for you to report that you made $0.00 in a year?

    What is the outcome if you do not............

    Let's say you do the above.

    Then as a treat because you have been so successful you buy yourself a shiny new Mercedes Benz. Because of Organized Crimes Laws and Counter Terrorism Laws the dealership will report the large purchase made in cash to the IRS.

    The IRS will compare that purchase to your reported income. Seeing as you have not reported and income the Agents come to you.

    Federal Agents in SWAT gear with body armor and machineguns will raid your residence. The will hand cuff you and remove you from the residence. This is usually done in the early hours of the morning to catch people off guard.

    The purpose of the raid is to execute a Federal Search Warrant.

    They will seize computers, notebooks, e-anything, and any materials such as safes, and expensive "luxury items" that would indicate you are living above your stated income. This goes into a holding facility, to be returned if you are found innocent or to go to auction if you are found guilty.

    The IRS will put a freeze order out to the financial industry. You will not be able to access any bank account or other financial anything until a Judgement is rendered.

    This all can affect anyone in co-habitation with you.

    Being found guilty can lead to a forfeiture of your possessions, and to time to be served in a Federal prison.

    .......................

    You may stay under the radar reporting less but, you won't paying nothing.

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    Default Re: Do you *not* pay taxes?

    Oh I almost forgot.

    The IRS will then begin an investigation to determine what your income actually was and then make a determination of the taxes owed based on this investigation.

    They could rule in the six digits for income, and tax accordingly with penalties added.

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    Default Re: Do you *not* pay taxes?

    The correct answer is you have to report all your income, cash or otherwise.

    Whether or not you can theoretically "get away with not paying taxes," is another thing. Theoretically speaking, you could probably get away with it if you don't receive W-2's or 1099's AND you're not making gobs of money. I'm not sure what exactly gobs of money means, but if you told me you're hypothetically pocketing 20k a year and there is no IRS reporting to you in the form of 1099's etc, I'd say there is almost zero chance you'd be caught. If suddenly you are trying to pocket $100k in cash then you're making yourself a potential big target.

    Also remember that the IRS is in a lot of ways like a business. They don't want to spend thousands of dollars chasing after a couple thousand dollars. But if they could nab tens of thousands of dollars or more, then they will gladly spend the money doing so.

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    Default Re: Do you *not* pay taxes?

    ^^^ I would also elaborate on Robertjordan's comment that, like any business, the IRS will seek a 'quantity discount'. As such, if their computers start showing that several girls who received 1099's from webcam hosting service X or strip club Y have been identified as under-reporting their incomes, it's an extremely simple and inespensive matter for the IRS to have their computers start running scans on ALL tax returns showing 1099 income from the same webcam hosting service X or strip club Y.

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    Default Re: Do you *not* pay taxes?

    I'm new here, but noticed that Melonie's posts that I've read are all spot on.

    I am actually in the department that files the reports on suspicious activity and large currency transactions, etc at a bank, and can tell you that many, many things get filed monthly about people for a variety of reasons.

    The most important thing with regards to banks is to remember it is NOT up to a teller or branch to notice your sly moves. Banks have sophisticated monitoring systems that watch all aspects of accounts for hundreds of metrics of suspicious or reportable transactions.

    A common thing is "structuring" - that is, making frequent cash deposits below the $10k limit that aggregate to over $10k within x amount of time. Aside from being easily detected by automated systems, it carries up to a 250k fine and 5 years in prison. You'll likely never get that fine or prison time, but IRS does absolutely review these and will come investigate, especially if your occupation is something like "student".

    Banks watch you and tell on you much, much more than you might think. Reporting it is much safer for you.

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    Default Re: Do you *not* pay taxes?

    ^^^ again I'll try to skirt the political aspects and concentrate on the financial, but ...

    As Sarge and Cerberus both point out, over the last several years the gov't / IRS has placed less emphasis on the 'income reporting' side of their information gathering ... with a notable exception being mandatory 1099 issuance by all businesses making payments to US businesses that was included in the recent National Health Care bill ( that is currently not being enforced yet ). Instead the gov / IRS has been vastly increasing their information gathering on the 'spending' side ... based on authority provided under terrorist anti-money laundering laws etc. The IRS now applies the theory that any money being 'spent' first had to be 'earned', and attempts to correlate reported spending levels with reported earnings levels on tax returns ... with any major discrepancy leading to an IRS 'assumption' that the person is deliberately under-reporting their income to avoid taxes.

    At this point, car dealers, banks, colleges, corporate landlords, hell even grocery stores and the USPS who sell money orders, are all bound by IRS reporting requirements to automatically report cash transactions. And as Cerberus points out, the automatic cash transaction reporting is no longer solely triggered by the size of any single cash transaction, but now also by a pattern of many smaller cash transactions. It's a pretty sure bet that any dancer who is making weekly cash deposits of say $1000 to her bank account, while falling under the $3000 / $10000 single cash transaction reporting limit ( varies by state since state income tax dep'ts can set lower reporting limits but still copy the IRS ) has already attracted the attention of bank computers, with a high probability that her 'suspicious' pattern of cash deposits has already been reported to the IRS by said bank.

    The bottom line here is that, absent a history of tax return filings and income tax payments to 'explain' where the money has been coming from, dancers who choose to under-report their incomes run an increasing risk of eventually attracting IRS attention even if they don't make any large cash transactions. And they WILL attract immediate IRS attention if any large cash transaction is attempted, from the purchase of a home / car to the payment of college tuition to the signing of a lease with a corporate landlord. And receiving a 1099 / W2 from a business that falls on the IRS list of business segments having historically poor tax compliance ( which includes strip clubs, webcams, all 'adult businesses' ) only serves to attract yet more potential IRS attention.

    Granted that transitioning from the 'good ol days' where some dancers could pocket $50k-$100k in annual 'cash' income ( while paying little or nothing in the way of taxes ) to the present day situation where dancers earning $50k must pay ~$12k in total taxes and dancers earning $100k must pay ~$35k in total taxes is 'painful'. However, being caught by the IRS for failure to report income and pay taxes will definitely be even MORE 'painful'.

    ~
    Last edited by Melonie; 10-30-2011 at 07:34 AM.

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