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Thread: Tax money

  1. #1
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    Default Tax money

    This may be a dumb question, but I've decided to be a responsible human being and pay dancer taxes and I'm still not sure about everything. I know to put aside 30-35% of my income, save receipts and file quarterly (thanks SW ladies!). My question is about the tax money itself. Where do you store the $$ until you send it all to the IRS? Is a seperate bank account good? Or a safe? Maybe half and half? What are the advantages and disadvantages of sticking your tax money in different places? Thanks!

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    Banned Melonie's Avatar
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    Default Re: Tax money

    Since tax liability is 'personal', it really doesn't matter if you choose to keep tax money in your personal bank account or a ( new ) business bank account from the standpoint of actually paying estimated taxes. However, if you are ever audited, it may help your 'credibility' to maintain a separate ( new ) business bank account ... into which you deposit your dancer earnings, from which you withdraw money to pay for tax deductible business expenses, and from which you withdraw / transfer money to your personal bank account as your personal 'salary'.

    In terms of keeping money in a bank account versus a home safe, I may not be the best person to ask. For starters, any money deposited and withdrawn from bank accounts creates a 'paper trail'. Second, with certain 24 hour ATM's as the 'exception', you can only access large amounts of money from your bank account during banking hours. And, obviously, in situations where the power fails, the bank has 'problems' etc. it may be impossible to access money in your bank account for some period of time. But bank robberies are extremely rare these days !!!

    In terms of a home safe, you can access your money at ANY time. No 'paper trail' is created when you put money in or take money out of your safe. But home burglaries are on the rise these days.

    So the question of using a home safe boils down to a trade off on several points ...

    How much money are you talking about ? If you're earning $1000 per week pre-tax and setting aside $333 per week for estimated taxes, during the 13 weeks between estimated tax due dates the amount of money in your safe could build up to $4,000. If you're keeping even more of your earnings in your safe, the amount could be even higher. So the amount of money involved is WAY more than you can afford to 'lose' via a burglary.

    How many people know that you are a dancer ? The stereotype says that all dancers earn mad amounts of undocumented cash ... thus ripping off a dancer is considered to be a 'low risk, high return' proposition in some quarters. And the worst 'candidates' for ripping you off are close friends and/or family members who know your 'routine'. Of course, there is also a risk that would-be burglars who have casually heard that you are a dancer will take a calculated risk of ripping you off ... based on a common dancer stereotype assumption that the dancer is 'flying below the radar' on reported earnings and thus can't report a burglary / theft without opening a Pandora's Box full of IRS problems. However, if you plan on reporting and paying taxes, while that scenario wouldn't apply it still wouldn't make a difference to these would-be burglars.

    How much are you willing to invest in a 'quality' burglary resistant safe ? The $150 big box specials can be carried off or broken into so easily it's ridiculous. About the minimum you'll wind up spending for a 'quality' safe is $400 see Also, for any real security against a burglary, the safe needs to be hidden from plain view, as well as bolted down to the floor !

    Personally speaking, I'm a big believer in utilizing a 'quality' home safe for 'medium' amounts of money ... after facing a multi-day power outage in NY City where no bank computers, ATM's or credit card terminals were operating, after getting a call from a fellow dancer needing $1000 in cash bail money at 2am on a Sunday morning, etc. I wouldn't try to keep $10,000+ in it though.

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    Default Re: Tax money

    What about keeping some money in your account, some in a home safe, and the rest in a safety deposit box?

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    Default Re: Tax money

    Ahhh ... bank safety deposit boxes. Yes these provide virtually absolute security against burglary / theft. Yes these provide some amount of privacy ... in the sense that cash being added to or taken from an individual's safety deposit box does not create a 'paper trail'. But on the flip side, bank safety deposit boxes can only be accessed in person at the specific bank branch where the safety deposit box is 'rented', and can only be accessed during 'official' days / hours when that branch is open for business.

    Additionally, bank safety deposit boxes are not 'immune' from having the contents examined at the behest of the IRS, a state tax or social welfare agency, a family court, etc. While examination of safety deposit box contents is supposedly never conducted at random, they are in fact significantly more 'exposed' than the contents of a home safe ( which would require a court ordered search warrant for anyone but yourself to access ).

    Personally speaking, the inconvenience of access, and the partial exposure to having the contents of a bank safety deposit box examined under certain circumstances, has caused me not to utilize a bank safety deposit box. Instead, I have stepped up the 'security factor' regarding keeping valuables in a home safe. I did this by resorting to using TWO safes not just one.

    My first safe is a smallish 'big box special' floor safe, which is located in a semi-conspicuous spot. I keep moderately important documents in this safe, as well as a couple of hundred dollars in cash, max. If I am ever burglarized, I WANT to have the burglar find and crack this safe ... and if I am ever robbed, I WANT to have the robber force me to open this safe.

    The reason for this is that I also have a second 'high quality' wall safe in a well hidden spot, in which I keep larger amounts of cash, gold, jewelry, and very important documents. See



    Since no home safe is burglar-proof, I'm relying on the existence of my first safe to act as a 'diversion' so that a burglar or robber won't bother to look any farther !!!
    Last edited by Melonie; 01-15-2014 at 08:11 AM.

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    Default Re: Tax money

    I don't know any dancers who actually end up owing 30%+ and the vast majority of us just pay once a year when we file. a separate bank account can always be a plus since it might help establish a history at a bank you want to get a loan from years from now plus you may need to show a history of regular bank deposits for getting credit or an apartment.

    as for a safe, get one that attracts no attention if you get one at all.

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    Default Re: Tax money

    I don't know any dancers who actually end up owing 30%+ and the vast majority of us just pay once a year when we file. a separate bank account can always be a plus since it might help establish a history at a bank you want to get a loan from years from now plus you may need to show a history of regular bank deposits for getting credit or an apartment.

    as for a safe, get one that attracts no attention if you get one at all.

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    Default Re: Tax money

    If you are going to pay your taxes, the whole point is to have a certain paper trail. Thus, a business bank account from which you pay your taxes is a good thing.

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    Default Re: Tax money

    I don't know any dancers who actually end up owing 30%+ and the vast majority of us just pay once a year when we file
    Well, in terms of tax rates, every self-employed dancer will owe 15.3% social security ( aka self employment ) tax. Depending on the amount of income earned, it's entirely possible that full time dancers will fall into the 21%+ federal tax bracket. And dancers living in states with their own income taxes can add 4%+ state tax bracket. Granted that exemptions and deductions reduce the 'effective' tax rates by reducing the amount of taxable income. But a 30% combined effective tax rate is pretty realistic for many full time dancers.

    In regarding filing estimated taxes once per year versus quarterly, IRS rules require quarterly estimated tax filings / payments if any significant amount of income is involved. Failing to file and pay estimated taxes can result in not only the same amount of taxes eventually paid but may also add 'under-withholding' penalty charges and interest charges tacked on by the IRS.

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