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Thread: I don't know a THING about taxes.. help?

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    Default I don't know a THING about taxes.. help?

    This is my first year dancing...
    I havent saved any reciepts, or kept track of how much I make, and have put less than 3,000 dollars in a bank account all year.
    (went through an extremely hard time)


    Here are my questions:
    I don't even know if its necessary if i file taxes this year, (see above) what do you think?

    If I wanted to, how would I do it, and how much do I owe?!?!

    How much do strippers typically owe? I'm guessing a SHITLOAD

    Next year I want to do it right, and save receipts and what not. Do you guys write down house fee's as tax write offs?

    Will I be in any trouble if I don't do taxes this year? Or could I just have my mother claim me and say I didn't work this year?

    Are doing taxes REALLY even important for us?

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    Default Re: I don't know a THING about taxes.. help?

    Yes, it's necessary to pay your taxes. Your club will most likely send the IRS a 1099. If you skip out on taxes, the IRS will find out one way or another. If you owe a lot, they can give you a payment plan.

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    Default Re: I don't know a THING about taxes.. help?

    The 'official' answers to your questions more or less go as follows ...

    - any independent contractor dancer who earns more than $600 during the current year must file a tax return

    - in order to avoid having to pay higher income taxes themselves, clubs typically report to the IRS ( via form 1099-misc ) the amount of customer money that the club has processed and paid out to the dancer. This typically includes any customer credit card charges, any club 'funny money' cash-in payments etc. The 1099-misc form that will be sent to the IRS and state tax dept't includes the dancer's real name, real address, social security number etc. as well as the amount of total money the club paid out to the dancer during the previous year. Also, clubs aren't required to send out 1099's until the end of february of the following year.

    - When the IRS receives the 1099 form from the club, it's computers will go searching in an attempt to find a tax return having been filed by the same person at the same address with the same social security number. If no tax return is found, this guarantees an ( eventual ) knock on the dancer's door. If the dancer happens to be a 'dependent', and the IRS matches up the social security number on the 1099 form with the social number of a 'dependent' on a parent's tax form, the IRS will wind up auditing the parents as well as the dancer.

    - Where every US dancer is concerned, they will owe a 15% 'self-employment' ( i.e. social security + medicare ) tax on EVERY dollar earned. Also where every US dancer is concerned, they will also owe federal income tax with the tax rate based on a sliding scale. For a single 'full time' dancer with no children who does not own a home, the probable effective federal income tax rate will be on the order of 15%. And in states like Colorado that levee their own income tax, the probable effective state income tax rate will be on the order of 3%.

    - Put this all together, and average full time dancers can expect to be paying out a total of 33% of their previous year's income in taxes. High earning full time dancers will probably wind up with a higher percentage, while lower earning part time dancers will probably wind up with a lower percentage. But in no case will the effective tax rate be less than the 15% 'self-employment' tax. If the dancer has not made estimated tax payments during her first year of dancing, this entire amount due on this year's income will become due and payable on April 15th of the next year. And to make matters even worse, estimated tax payment for taxes due on next year's first quarter ( Jan + Feb + Mar ) earnings will ALSO be due and payable on April 15th.

    - If the dancer doesn't have the cash to make these payments by the April 15th deadline, the IRS will readily agree to 'finance' the payment of past due taxes ... with interest ! Essentially, where perhaps a $25,000 back tax bill is involved, this will amount to the equivalent of making a 'car loan payment' every month ... but without owning the car ! Also, drawing IRS attention over back taxes will also draw ongoing IRS attention regarding future taxes and future estimated tax payments. Thus from April 15th forward, the IRS will be expecting quarterly estimated tax payments on the order of 30% of the amount the dancer is earning, PLUS a back taxes payment of several hundred dollars per month which must come out of the other 70%. Also, failure to pay the State of Colorado their own taxes will result in a separate but similar situation.

    - If the dancer is NOT financially 'emancipated' from her parents, i.e. if the dancer is claimed as a 'dependent' on a parents' tax return, effective tax rates on the dancer's income get even higher since the personal exemption and deductions available for each person are applied to the parents' tax return / tax liability, not the dancer's tax return / tax liability. Also, if the dancer is claimed as a 'dependent' on a parents' tax return, the IRS may choose to pursue the parents for the full amount of the tax liabilities of their 'dependent' in lieu of offering a monthly payment plan to the dependent to 'finance' their unpaid tax liability.

    - not wanting to create undue worry, but for a fact a provision of the National Health Care act was the addition of 15,000 new IRS agents to increase enforcement of tax collections. Another provision of the National Health Care act ( which is being litigated and was temporarily stayed, but many large companies are complying anyhow because doing so reduces their own taxes ) is a much more stringent mandate that businesses ( like strip clubs ) issue 1099's for payments made to other businesses ( like exotic dancers ). Targeted enforcement is now being directed at 'cash' businesses ( of which exotic dancing is one ), and toward 'adult' businesses ( of which exotic dancing is also one ), in an effort to significantly improve tax compliance for an economic segment where past tax compliance has been ... well ... notoriously poor ! Thus the odds of successfully 'getting away with' not reporting dancing income are steadily declining.

    And while the OP didn't specifically raise this issue, I'll include it for general reader information. If the 'dependent' dancer also happens to be a college student, the unexpected arrival of a 1099 form can cause havoc. The reason is that student loan and grant eligibility is based on 'family' income ... which for an unemancipated college student exotic dancer means both the parents' income PLUS her dancing income. If the existance of dancing income was not included in the student loan / grant forms sent in by the parents, the student dancer may have already received student grant money that she was not legally entitled to. Thus the unexpected arrival of a 1099 for dancing income, in addition to the tax consequences, may also prompt a ( partial ) student grant repayment mandate by Sallie Mae upon the parents who filed the 'fraudulent' student grant application form.


    ~
    Last edited by Melonie; 11-20-2011 at 08:58 PM.

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    Default Re: I don't know a THING about taxes.. help?

    So the IRS is definitely getting a number with this chain (I assume they do a similar procedure nation wide), and while it's not very accurate, it's definitely enough for the IRS to audit if I just decided not to pay taxes
    There are lots of variations from club to club in this regard. Clubs that do not accept customer credit cards, and rely on ATM's plus customer cash, may not account for dancer earnings in any way - and thus may not issue 1099's at all. Clubs that do accept credit cards, as well as clubs which require that customers pay the club rather than the dancer for 'private dances' and/or 'VIP room', will almost certainly issue 1099's for the 'cut' of total customer private dance / VIP room money the club pays out to the dancer at the end of the night. And obviously the dancer 'cash box' approach, with dancers accepting customer money directly but paying a 'cut' to the club at the end of the night, is yet another variation on the same theme. The basic principle is that the IRS will expect either the club or the dancer to report customer money as taxable income ... where the issuance of 1099's allows the clubs to assign some portion of customer money as dancer income thus avoiding the possibility of the club having to pay income taxes on customer money that the didn't actually keep !

    However, in the vast majority of cases, clubs will not track or report 'tip money' or other customer money paid directly by the customer to the dancer without the club being involved. But the IRS definitely recognizes that exotic dancing involves tip income, will expect to see an amount of total income reported by dancers that exceeds the amount of non-tip income the club reported on the 1099, and may decide to investigate further if a dancer's tax return reports a total income figure that exactly matches the total dollars reported by 1099's.

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    Default Re: I don't know a THING about taxes.. help?

    I just found this post. I was wondering I heard that clubs won't send in the 1099 if you haven't sold any CR or VIP in which a card or funny money was used. Is this true? But if they take a cut from your dances like, 5 dollars, then they will? Sorry if this has already been answered!

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    Default Re: I don't know a THING about taxes.. help?

    ^^^ well, legally speaking, if the clubs are actually handing you money at the end of the night, instead of the customer handing you money directly, 1099's are supposed to be issued. However, lots of clubs don't follow the letter of the law ! Generally speaking, the more 'corporate' the club, the higher the probability that 1099's will be issued.

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    Default Re: I don't know a THING about taxes.. help?

    Quote Originally Posted by skylar_jade View Post
    I just found this post. I was wondering I heard that clubs won't send in the 1099 if you haven't sold any CR or VIP in which a card or funny money was used. Is this true? But if they take a cut from your dances like, 5 dollars, then they will? Sorry if this has already been answered!
    If your customer paid using a credit/debit card, then it'll be on a 1099. If you purposely avoid customers who use cards, you probably won't be making decent money.

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    Default Re: I don't know a THING about taxes.. help?

    Thanks, melonie. I'm just wondering because the new place where I want to dance takes 5 from each dance. And I have a family trust, and a family accountant does all of my taxes including all of my families. And as of right now my family isn't aware of what I do. Would I be able to just file my 1099 separately and have the family accountant do everything else? I'm sorry if this is out of your realm, but I've tried asking other dancers at work and they laugh it off and some dot even file

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    Default Re: I don't know a THING about taxes.. help?

    Would I be able to just file my 1099 separately and have the family accountant do everything else?
    Any 1099 reported income must be added to Schedule C attached to your personal tax return ... so in your situation the answer to your question is no.

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    Default Re: I don't know a THING about taxes.. help?

    Quote Originally Posted by Melonie View Post
    Any 1099 reported income must be added to Schedule C attached to your personal tax return ... so in your situation the answer to your question is no.
    Someone mentioned because I also have a day job, that if I have them deduct a certain amount from my paycheck I could skip that. Is that true?

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    Default Re: I don't know a THING about taxes.. help?

    You can potentially skip the need to file and pay quarterly estimated taxes on your dancing income by increasing the automatic estimated tax withholding level of your day job's paychecks to a high enough level to cover your tax liability from both your day job and dancing. However, this does NOT affect the requirement to report your dancing earnings on Schedule C and include it with your personal tax return.

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    Default Re: I don't know a THING about taxes.. help?

    Okay, got it. Looks like I am just gonna have to get a different accountant to do it! Again, thanks so much, melonie! You are so helpful and kind. I really appreciate it! I am just taken aback by how many dancers that don't file their taxes!

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    Default Re: I don't know a THING about taxes.. help?

    I am just taken aback by how many dancers that don't file their taxes!
    Admittedly, in the 'good ol days' before the US congress and IRS enacted increased automatic income reporting requirements plus automatic reports of 'spending' that can be automatically compared to the amount of income reported on tax returns, if dancers 'forgot' to report their incomes there was very little chance of the IRS discovering that fact. However, these days, ALL US clubs are legally required to issue 1099 income reports for all money paid out by the club to dancers ... although admittedly some clubs still do not do this. More importantly, these days, every state property title agency, state motor vehicle agency, college bursar's office, bank, investment broker, retirement fund etc. are required to automatically provide info to the IRS. Beyond that, 'cash transaction reports' are required by the IRS for all cash transactions involving $10k / $3k. And even money order sellers ( including the USPS ) are required by the IRS to report cash transactions involving $1k ! And as a side issue, the IRS now maintains a database indexed by zip code for the 'typical costs of living' in every zip code area, based on local rent prices, utility rates, food costs, sales tax rates etc. So if a dancer attempts to 'forget' to report her income this year, but buys a condo or a car, or pays tuition without the use of gov't grants and loans, or deposits a significant amount of money in a bank, brokerage or retirement account, etc., IRS computers will now start waving red flags.

    Thus, IMHO at least, any dancers who are still attempting to 'forget' their tax liabilities are taking a huge risk. And to make matters 'worse', the new national health care law allowed the IRS to nearly double the number of human IRS agents on top of the increased automatic reporting and computer matching capability the IRS has also put in place.

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    Default Re: I don't know a THING about taxes.. help?

    ^^^
    Wow, seems like the IRS is getting very strict! And again, I feel like I know a couple younger dancers that aren't even worried the slightest about how it all works! I admittedly didn't even think about it until two months in!

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    Default Re: I don't know a THING about taxes.. help?

    ^^^ obviously, both federal and state gov'ts are running huge deficits of tax revenues versus gov't spending. If the IRS and state tax agencies are able to collect a higher percentage of the taxes already authorized by existing law, it will reduce future deficits plus avoid the re-election risk of politicians attempting to pass new tax laws.

    In the past, it was difficult and expensive for the IRS and state tax agencies to 'close the loop' on actual spending versus reported income. In the past, this required a huge investment of IRS human agent investigation ... thus spending side tax enforcement measures were typically confined to American multi-millionaires ( archetypical example Al Capone ) who could potentially yield millions of dollars in additional tax revenues and thus allow IRS to 'turn a profit' on their human intensive investigation. However, with today's instant communications and heavy duty computing power, the IRS can perform spending side tax enforcement investigations much more cheaply since very little actual IRS agent human labor is now required. Thus the IRS can now 'turn a profit' by performing spending side investigations of people working in 'cash' business ( like exotic dancing ) earning less than $100k per year.

    In the past, it was also possible to buy a house or a car, to pay tens of thousands of dollars worth of college tuition, to invest tens of thousands of dollars in stocks or bonds or CD's etc. without anybody questioning where that money came from in the first place. 9/11 and the subsequent Patriot Act and Terrorist anti-money laundering laws / treaties changed that forever. Today, if a dancer or anybody else buys a house or a car, pays tens of thousands of dollars in college tuition ( without tens of thousands of dollars from matching gov't grants or student loans ), saves and/or invests significant amounts of money etc. it is guaranteed that IRS computers are going to 'ask' where that money came from in the first place ... starting with the amount of income that same person reported on their tax return. If the IRS computers find a 'gap' between the amount of money a dancer or anybody else reported as having earned, and the amount of money that the dancer or anybody else actually spent, it is guaranteed that IRS human agents will be knocking on that dancer's door in the near future !!!!
    Last edited by Melonie; 03-30-2012 at 04:50 PM.

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    Default Re: I don't know a THING about taxes.. help?

    ^^^ I would also add that the IRS and state tax agencies will assume that anyone receiving a 1099 income report from a cash business / service industry will also have additional 'tip' income that was not included in the reported 1099 amount. Thus filing a tax return with total reported income based solely on the amounts reported via 1099 will probably draw suspicion that actual income is being under-reported.

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    Default Re: I don't know a THING about taxes.. help?

    I think that we're forgetting something for the uneducated newbie - your first year of owning a business i.e. stripping (unless something has drastically changed), you don't have to file quarterly. That gives you the opportunity to see how seasonal your job is.

    The second year, you do - or you risk incurring penalties.

    Just a

    By no means am I an expert and you should always plan for next year. Document your spending. Budget yourself. Deposit savings.

    But as far as I know, business expenses under $75 , like a $5 garter from a house mom, do not require receipts.

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    Default Re: I don't know a THING about taxes.. help?

    your first year of owning a business i.e. stripping (unless something has drastically changed), you don't have to file quarterly. That gives you the opportunity to see how seasonal your job is
    This is technically true. However this does NOT mean that first year exotic dancers or camgirls are exempt from taxes being due on their first year's income. If quarterly estimated tax payments are not made ( under the first year new business exception ) during the first year, this in turn will mean that the entire amount of taxes due on ALL of their 2011 income, PLUS the no longer excepted quarterly estimated tax filing and payment due on their January through March 2012 income, will ALL be due and payable by April 17th.

    For a reasonably average dancer or camgirl whose average earnings are in the neighborhood of $1000 per week = $50,000 per year, if the girl is single and does not have any major tax deductions ( like home mortgage interest payments ), her effective tax rate will be somewhere in the neighborhood of 15% social security / medicare tax plus 15% federal and state income tax = 30%. If no quarterly estimated tax payments were previously made during 2011, this will mean that, by the annual tax return filing date of April 17th she must pay somewhere around $15,000 in taxes due on that 2011 income. PLUS she must pay another $3,750 or so in estimated taxes due on her January through March 2012 income by the same deadline.

    $15,000 + $3,750 = $18,750 as a lump sum can be a huge amount to come up with. For this reason, I never recommend that new dancers or camgirls utilize the first year exception to avoid estimated tax filings. Obviously a lot of dancers and camgirls have allowed themselves to be placed in this situation, either through a lack of knowledge about their business tax responsibilities, or through misplaced 'faith' that their dancing or camming incomes would not be reported to the IRS thus allowing them to 'forget' to report their actual incomes and pay appropriate taxes.

    I'm very fearful that this year's new IRS reporting requirements on foreign banks, corporate clubs etc., and the resulting 1099 income reports, is going to result in a whole lot of 'unpleasant surprises' for dancers and camgirls who attempted the latter ! Some of them have given the 1099's they received to a tax prep service, or have prepared their own tax returns via TurboTax or another tax prep program, and are just now finding out how much money they actually owe in taxes. If no estimated tax payments were made during 2011, they are now in a situation of having to find a way to come up with $18,750 ( or whatever ) within the next two weeks !!!

    Most will find this impossible. This in turn will result in their accepting some sort of IRS payment plan, which will add interest to the amount of taxes that they are unable to repay immediately. This will also focus a bunch of IRS attention on both the repayment of overdue 2011 taxes plus the future payment of estimated taxes. Putting some numbers to this, if the $18,750 + 7% interest = $20,000 in 2011 + 1Q 2012 taxes must be repaid within a year, this will add about $20k/52 = ~$400 a week in ADDITIONAL tax burden to the 30% of $1000 per week = $300 tax burden of making future estimated tax payments on 2-3-4Q 2012 income. Thus for the next year, the dancer or camgirl's $1000 per week average earnings will actually translate into $300 in 'spendable' money after the IRS has been paid. Once the ADDITIONAL 2011 + 1Q 2012 taxes have been repaid a year down the road, she will be able to pay ~$300 towards estimated taxes and keep ~$700 per week in 'spendable' money after IRS estimated taxes have been paid ... which is the amount she should have been paying in estimated taxes and keeping as 'spendable' money from day one of dancing or camming.
    Last edited by Melonie; 04-01-2012 at 08:12 AM.

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    Default Re: I don't know a THING about taxes.. help?

    This thread has been tremendously helpful so I thank you very much!! However I'm still confused about what expenses I am able to write off on my taxes. The club that I work for has told me that I can deduct house fees and transportation expenses but I have also heard that purchases relevant to dancing may be deducted as well as some beauty expenses and possible even cosmetic procedures. Does Melonie or anyone have any infomation or advice in regards to this issue? Thank you so much.

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    Default Re: I don't know a THING about taxes.. help?

    ^^^ your questions have been covered in many other threads ... but a quick summary goes like this ...

    You can either 'net out' house fees and report the amount of money you leave the club with at the end of the night as your income, or report your pre-house fee payment gross income and then deduct the house fee payments as a business expense

    Transportation expenses between 'home' and 'work' are NOT deductible. However, if your regular club sends you to a sister club, the mileage in between clubs IS deductible as a business expense.

    You can deduct 100% of anything that can ONLY be used to support your work as a dancer. This includes things like theatrical makeup, non-street legal stripper outfits etc.

    You can try to deduct 50% of other items that fail the 'Housewife Test' ( i.e. housewives also spend money on these things with absolutely no business reason for doing so ) . Examples are department store makeup, tanning, hair and nail salon, bikinis, etc.

    The US congress has declared that all cosmetic surgery is for personal benefit thus not deductible as a business expense. The one exception is 'professional sized' breast implants, which a tax court ruled can be deducted as a business expense since the size is so large as to cause 'problems' in normal life situations. Generally accepted definition is that implants must be greater than 1000cc each to qualify for this deduction.

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    Default Re: I don't know a THING about taxes.. help?

    OKay I will definitely search the site for additional relevant threads but Thank you so much for the above response, that is incredibly useful information to know. It's amazing how knowledgeable you are about all of this, thank's again

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    Default Re: I don't know a THING about taxes.. help?

    Quote Originally Posted by Fionaver View Post
    I think that we're forgetting something for the uneducated newbie - your first year of owning a business i.e. stripping (unless something has drastically changed), you don't have to file quarterly. That gives you the opportunity to see how seasonal your job is.

    The second year, you do - or you risk incurring penalties.

    Just a

    By no means am I an expert and you should always plan for next year. Document your spending. Budget yourself. Deposit savings.

    But as far as I know, business expenses under $75 , like a $5 garter from a house mom, do not require receipts.
    That was very helpful. I'm trying to get a list together for deductions and realized that most of my work outfits have been purchased from assorted dress ladies who don't give us receipts so I have no record for those, and clothes and shoes are by far my biggest expenses. So at least I can deduct $74 worth of outfits. Or since each outfit ran about $20-40, can I do each one individually? As in, is it by category or by item? Gah. I like to consider myself to be an intelligent woman but I keep getting caught on little things like that when it comes to tax stuff.

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    Default Re: I don't know a THING about taxes.. help?

    Where 'record keeping' for income and business expenses is concerned, even if you don't have receipts for low dollar purchases the IRS will probably accept them as legitimate deductions as long as your dancing and/or camming business records appear to be professional and organized. At minimum this means a double entry ledger / spreadsheet ( with earnings on one side, and with expenditures on the other side ), with dated individual entries for every time you 'get paid' ( daily for dancers, whatever for camgirls ), and corresponding dated entries on the opposite side every time you purchase anything that is business related. Additionally, at the end of every quarter your ledger / spreadsheet should show quarterly total earnings. less quarterly total deductions, resulting in a quarterly 'net' earnings number from which the estimated tax payment can be guesstimated.

    When the end of the year rolls around and you summarize your business expense deductible items on the Schedule C form, there are a number of categories / lines for different types of deductible items. For example, the total spent on clothing items etc. will go on one line, where legal fees go on a different line, where 50% of makeup etc. will go on yet a different line. If you are using a tax prep program, they provide a 'supporting detail' entry form where everything can be itemized ... which is helpful if you are ever audited.

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    Last Post: 04-18-2006, 12:13 PM

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