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Thread: Making the move from employee to independent contractor

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    Dizzy Making the move from employee to independent contractor

    I've only been dancing for a few months, but tax season has rolled around and I've come to realize how working as an employee dancer (i.e. receiving a W-2 from the club) has put me in the proverbial "rock and a hard place," as Melonie has explained in her many informative posts! I ultimately do not want to come under fire by the IRS for not reporting my tip income properly due to the fact that I was unable to legally report my tip income through the club's payroll system. Therefore I feel the best course of action is to file my taxes to the best of my ability for 2014 (i.e. filling out the Form 4137 and, if necessary, providing my statement of reasonable cause for not being able to report my tips properly) and then try and make the move over to a club where I can work as an independent contractor. However, this opens up a whole new realm of taxes that I have never dealt with before as I have only ever worked as an employee at "vanilla" jobs, meaning I received a W-2 and filled out a pretty simple 1040-EZ form.

    I think I have a good start on learning (via this site and its links: http://www.irs.gov/Individuals/Self-Employed) about federal taxes as a self-employed individual, and I realize that I will not need to make quarterly estimated tax payments for the year 2015 as this would be my first year operating as an IC (assuming I get hired at the club I'm interested in...), but I am so much less familiar with state-specific tax forms and requirements and am totally lost!!

    Also, would I need to be a "registered business" in order to open up a business account at the bank? Do these types of accounts typically have monthly fees? This (business accounts) is another thing about which I am completely clueless!

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    Default Re: Making the move from employee to independent contractor

    I believe there is a stickied thread of tax forms in this forum that should be helpful.

    I know Wells Fargo's business accounts start at $10 a month, and you can get it waived by doing x number of deposits, keeping a balance, etc. You can open an account as a sole proprietor, but I think there are requirements for having filed paperwork with the state if you are doing business under anything other than your legal name (which I would assume you are, having a stage name).
    "People jack off with the left hand and point with the right."

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    Default Re: Making the move from employee to independent contractor

    Quote Originally Posted by Selina M View Post
    I believe there is a stickied thread of tax forms in this forum that should be helpful.
    Yes, I've seen that thread and it is very helpful, but a lot of the state-specific information seems to be relevant to Michigan... I think it's time I roll up my sleeves and start digging into some more research. I will report back when I find more info!!


    Quote Originally Posted by Selina M View Post
    I know Wells Fargo's business accounts start at $10 a month, and you can get it waived by doing x number of deposits, keeping a balance, etc. You can open an account as a sole proprietor, but I think there are requirements for having filed paperwork with the state if you are doing business under anything other than your legal name (which I would assume you are, having a stage name).
    Oh, that statement about paperwork leads me to another question... what is the process for getting started doing business as a sole proprietor? Is there a sort of "small business license" or something that I have to apply for? Does it differ by state? Not sure how that works, but I know of some people who are sole proprietors of their own small businesses so it can't be terribly difficult! I'd ask them personally, but knowing what they know about me I really have no legitimate reason for inquiring!
    Last edited by AngieLee; 02-19-2015 at 09:24 PM. Reason: Typo

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    Default Re: Making the move from employee to independent contractor

    Requirements that non-incorporated small businesses must be registered stem from state and local laws, thus vary from location to location. Agreed that registering a non-incorporated small business allows the operation of that business to appear more 'professional', even if registration is not absolutely required. It is also likely to be helpful when establishing true 'business' bank accounts.

    Google DBA plus the name of your state of residence.
    Last edited by Melonie; 02-20-2015 at 04:44 AM.

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    Default Re: Making the move from employee to independent contractor

    Turns out in the state of Minnesota the requirements for conducting business under anything other than one's full legal name as a sole proprietor requires one to file a Certificate of Assumed Name ($30 filing fee). After filing, the next requirement is to "publish the Certificate of Assumed Name with a qualified Legal Newspaper for two consecutive issues in the county where the principal place of business is located. After publication, the newspaper will return an affidavit of publication which should be retained by the business. Failure to publish may render the filing invalid." Annual renewal is required each year at no charge, unless the Certificate is allowed to expire, in which case payment is required for reinstatement.
    Sole proprietors with no employees are not required to have an Employee Identification Number (EIN), but may be required to have one in order to open a small business bank account. Apparently it can also reduce the risk of identity theft, but I'm not sure how that works.

    Yikes. I don't like the idea of having to publish the Certificate in thenewspaper; I don't understand why that's necessary!

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    Default Re: Making the move from employee to independent contractor

    Given the hassle one must go through in order to become a sole proprietor, I'm assuming most dancers do not go this route. So, my next question is how can a dancer work as an independent contractor without going through this process? I'm not going to be dancing for very much longer so I don't know if it's worth it to file a Certificate of Assumed Name and whatnot.
    Can a dancer still file quarterly estimated federal and state taxes as well as self-employment taxes without getting a separate tax ID number for sole proprietors? Is that even legitimate? Is a 1099 form required to file these taxes or can an IC dancer file her taxes without a 1099 from the club (i.e. if the club doesn't issue 1099 forms).

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    Default Re: Making the move from employee to independent contractor

    Most dancers are legally deemed to be independent contractor sole proprietor businesses regardless of whether they register a DBA ( = certificate of assumed name ). But without registering a DBA and filing for an EIN they are forced to use their real name, real address, real social security number etc. when reporting their business incomes on their tax return ... and will also result in 1099's being issued by clubs listing the same real name, same real address, same real social security number. This will create a direct 3rd party verified IRS paper trail that the person has worked in the adult entertainment industry, which may turn up during future background checks by 'sensitive' employers or state professional licensing agencies.

    However, reporting sole proprietor business income under the same real name and same social security number is 100% legal. Thus for dancers and camgirls who never need concern themselves with obtaining a state professional license or applying for a straight job with a 'sensitive' employer, it makes no difference whatsoever.

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