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Thread: Sugar Daddies & The Law

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    Default Sugar Daddies & The Law

    Ok so if you have a sugar daddy who give you money for everything, do you have to pay taxes?

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    Default Re: Sugar Daddies & The Law

    "Money comes in, but the fact is"....you ALWAYS gotta pay ur taxes

    Unless (and this is still not legal) it comes in All cash and u don't bank it, or spend it (spending 100k on a declared income of 20k can raise flags) u may b ok. But usually declaring a majority or all is ideal

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    Default Re: Sugar Daddies & The Law

    there is a large body of precedent that the IRS considers cash / gifts / perks provided by a gentlemen to a lady who has a personal history involving the 'adult industry' to be 'payments for services rendered' ... which are fully taxable as 'ordinary income'.

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    Default Re: Sugar Daddies & The Law

    Lol do you have to prove to them who your sugar daddy is? Or if he gave you $ to buy a car under five grand, that would cause the IRS to be suspicious. I mean if you say it was a gift, it"s really none of their business from who. Lol.

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    Default Re: Sugar Daddies & The Law

    Quote Originally Posted by JessicaCM View Post
    I mean if you say it was a gift, it"s really none of their business from who. Lol.
    There's a "gift tax" on gifts over a certain amount that the giver is supposed to pay.

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    Default Re: Sugar Daddies & The Law

    Oh. Cause I always wondered about girls who had sugar daddies, were "escorts", & make $ from spending time and doing favors for men. Cause some have condos, nice cars, yet no nine to 5. So I was just wondering how they possibly can pay rent/mortgage and live lavish without the government coming for them. Not all of them pay taxes either.

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    Default Re: Sugar Daddies & The Law

    Cause some have condos, nice cars, yet no nine to 5. So I was just wondering how they possibly can pay rent/mortgage and live lavish without the government coming for them. Not all of them pay taxes either
    The answer probably is that the IRS will get around to them eventually. This actually happened to a couple of NY dancer friends of mine, both of which registered fairly expensive cars in their own names ... which in turn resulted in an automatic report by the state DMV to the IRS ... which in turn resulted in a cross-check for tax returns filed and income levels reported that were remotely adequate to explain how such a purchase could be afforded given typical NY costs of living. In the end, both girls wound up losing their cars plus paying tens of thousands of dollars in back taxes and penalties on their unreported income.

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    Default Re: Sugar Daddies & The Law

    Oh man! That's awful.

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    Default Re: Sugar Daddies & The Law

    Are you getting your sugar in cash?

    If so, you are probably OK ( without paying taxes ).

    Technically, your received gifts are income and you do owe taxes. But practically ( unless he 1099s you, which is very unlikely ) the gifts will be un-noticed and you are OK without reporting them.

    Only thing to be careful of is if you receive gifts that can be tracked. Such as checks made out to you, cars gifted to you in your name, lease or rent payments made in your name, etc.

    I don't know your situation and it's not my business. But you might want to discuss this with your sugar daddy and ask him to help you out with your tax situation.

    For instance I have heard of Sugar Daddies making their sweeties no-show employees and giving them a paycheck each week. That is great, but is clearly a situation where taxes would be owed. Good Luck!

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    Default Re: Sugar Daddies & The Law

    Once you deposit it, buy something (like a car/house/school) with it, etc...

    THE IRS CAN FIND U

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    Default Re: Sugar Daddies & The Law

    ^^^ to elaborate on pinups4's comment, the IRS has steadily been increasing automatic IRS report generation requirements with college bursar's offices, with state motor vehicle dept's, with state property title registry offices, with banks and credit unions, hell even the US post office. It might be possible to accumulate cash under your mattress, or accumulate bank deposits on the 'down low' via creating several low balance accounts in several different banks, and thus avoid attracting IRS attention on the 'earnings' side. However, if you spend any of that money to purchase a house, a car, college tuition, any retail purchase over $3,000 ( in some states ), any money order purchase over $1000, etc. The IRS will receive an automatic report of those expenditures.

    When the IRS receives automatic spending reports in regard to person X address Y social security number Z, IRS computers will start an automatic cross-check that the same person X address Y social security number Z filed a tax return and paid taxes on a sufficient amount of income to explain how that spending was possible. In fact, the IRS computers are pretty 'smart' about this since they maintain a database of the typical costs of living ( rent costs, utility costs, grocery costs, sales taxes etc. ) in every different US zip code area - thus figuring that anybody living in a particular zip code area needs to spend a certain amount of dollars per year on those necessary items BEFORE they have money available to spend on college tuition, car payments, mortgage payments, big ticket purchases etc. If no tax return can be located, or if a tax return is located but the amount of reported income ( after taxes ) is insufficient to cover the amount reported as having been spent on college tuition, car payments, mortgage payments, big ticket purchases etc. a 'red flag' will be waved and an IRS audit is highly likely to follow. This is how my two dancer 'friends' wound up being 'outed' by their car purchases.

    If this were to happen in regard to spending money 'gifted' to you by a Sugar Daddy, the IRS auditor will absolutely investigate what sort of 'relationship' exists between you and Sugar Daddy. As mentioned earlier, where sex industry workers are concerned, IRS precedent dictates that they will interpret money received from Sugar Daddy not as tax exempt 'gifts' but instead as fully taxable 'payments for services rendered'. Under the same IRS precedent, the IRS may interpret non-cash perks such as use of an apartment, use of a car, health insurance coverage etc. on behalf of a sex industry worker as 'payment in kind / barter ' ... the cash value of which may also be fully taxable to the recipient.

    I would also point out that with the recent Supreme Court decision on Obamacare, the IRS was authorized to hire 16,000 additional auditors ... which will just about double the number of total auditors available to the IRS. And while the stated purpose of needing the additional auditors was to enforce new Obamacare taxes, it's highly likely that the IRS will actually wind up using those auditors to investigate any tax matter they want. This means that if past years' 'gap' between reported income and reported spending was say $20,000, due to limited past IRS auditor resources the IRS may have chosen to skip an audit and instead investigate 'bigger fish'. However, with nearly twice the number of IRS auditor resources becoming available, that same $20,000 'gap' may now very well trigger an audit.
    Last edited by Melonie; 08-06-2012 at 10:00 AM.

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    Default Re: Sugar Daddies & The Law

    Thanks for clearing it up. I'm definitely going to get things in order to avoid legal problems from here on out.

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    Default Re: Sugar Daddies & The Law

    Do! I once got penalized because I hadn't attached a w2 form to my taxes and the employer submitted the w2. Even though taxes were taken by the employer, my form was wrong. Irs has the power to check the strangest things

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    Default Re: Sugar Daddies & The Law

    ^^^ that's the result of the 'first pass' of IRS computer cross-checks ... which tries to automatically match W2 income reports received from 'employers' versus tax returns filed by 'employees' in exactly the same way a cross-check will be performed attempting to match 1099-misc forms received from clubs and/or webcam hosts with tax returns filed by dancers and/or camgirls. Failure to find a match will lead to a 'yellow flag' being waived ... that typically results in an IRS investigation. And unmatched W2's typically receive less attention than unmatched 1099's since, as you say, the IRS has already received some amount of withheld estimated taxes from the 'employee' via the 'employer's payroll tax withholding system - whereas unmatched 1099 income was not subject to such 'automatic' estimated tax withholding thus the IRS can potentially recover far more unpaid / unwithheld tax money from the 1099 recipient.

    During the 'second pass' of IRS computer cross-checks, they will try to match up the amount of reported income via the tax return ( after subtracting federal taxes paid) with the amount of spending being reported to the IRS by college bursar's offices, by state motor vehicle dep'ts, by state property title agencies, by banks and credit unions ( via cash transaction reports and/or 'suspicious activity' reports ), by brokerages and investment banks ( via dividend and interest reports ), by retailers ( via cash transaction reports ), by the US post office ( report of purchase of $1000 worth of money orders ) etc. The amount of estimated spendable income is further tweaked by IRS computer back-calculations on interest and dividends reported, by IRS computer look-ups of state and local tax rates, by IRS computer look-ups of 'typical costs of living' for every different US zip code area, etc. Failure to find sufficient reported income ( after taxes and tweaks ) to explain the amount of reported actual spending will result in a 'red flag' being waived ... that typically results in an IRS audit.
    Last edited by Melonie; 08-08-2012 at 03:38 AM.

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