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Thread: Tax dilemma! Don't want to get my club in trouble...

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    Default Tax dilemma! Don't want to get my club in trouble...

    Okay, here's what's going on...just started back at my old club. We get paid $9 an hour plus tips. Every payday, they have us write on a sheet of paper our "tips" - well, okay, about 7 - 10% of our tips, and that is what we get taxed on. All of the girls do it this way, because it is what we are told to do.

    I want to claim all of my tips, though. My husband and I would like to be able to move into a higher tax bracket, buy a new house, etc., and we want everything to be on the up and up. If I write all of my tips on this sheet of paper at work, and I am the only girl being taxed for such a high amount, I think it will raise a red flag where the IRS is concerned, and my employer could potentially get into trouble because of it. I don't want that.

    So my husband has been doing some research and found out that it is not legal for your employer to ask you to claim only 10% of your tips. If you make more than $20 a month in tips, you MUST report your tips in full to your employer by the tenth of each month on IRS form 4070 (I think that's the right one). I would love to be able to do this, but again, I fear the IRS coming down on my employer. Also, I really don't want to be the first person to go to him and say, "Hey, I want to do things differently than everyone else. I want to claim all of my tips." Why should I get preferential treatment, you know? Why must I set myself apart?

    Does anyone have any advice on what I should do, or how I should approach my boss about this? While everyone else at my club may be content claiming such a low percentage just because they don't want to pay in, I am not comfortable doing so. But am also not comfortable asserting myself to my boss.

    My husband came up with a pretty good proposition he thinks my boss may go for. If I can ask him to still pay me the wages but not in the form of a check...in cash, with no paper trail...then I can claim my wages as "tips" and claim 100% of my tips, while calling myself an "independent contractor." That way, no red flags for the club, I am basically not even listed as an employee, and I get taxed on all of my income.

    I hope some of you have some insight..it's frying my brain right now!

    What should I do?

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    Default Re:Tax dilemma! Don't want to get my club in trouble...

    Hooboy ! This matter could get "deep" in a hurry !

    I have to start by asking more questions in regard to your "paycheck". Does this check show federal and state tax, Social Security etc. being withheld by your "employer" ? The answer to this question of course will determine whether you are legally considered to be an 'employee' of the club.

    Assuming that you are now an 'employee', this implies that your 'employer' is currently paying the 7.5% match to your own Social Security taxes. If you transition to independent contractor status, be aware that you'll then become responsible for paying this yourself (in the form of a 15% self-employment tax). If you remain as an employee and wish to declare more tip income, not only will you have to pay 7.5% SSI taxes on the increased amount of income, but your clubowner will also have to pay the employer's 7.5% share on the increased amount of income.

    I agree that trying to go the independent contractor route would cause the fewest 'waves' for the clubowner.

    I should also point out that it appears the clubowner and all of the dancers including yourself are bending the tax law under the current situation. But the clubowner won't take any IRS heat if audited, because it is the dancers who are under-reporting their incomes.

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    Default Re:Tax dilemma! Don't want to get my club in trouble...

    Good advice, both of you. Lena, I think that's a great idea about claiming it under my own business. I benefit from it by being able to claim all of my money, and my club doesn't have to deal with any of it. Wonderful advice! Thanks a ton, both of you, for responding.

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    Default Re:Tax dilemma! Don't want to get my club in trouble...

    t's probably not technically legal, but my accountant doesn't think it's risky
    If you are declaring the income you are earning and paying estimated taxes, even if it is technically declared in the name of a "ficticious business", there are two schools of thought. One says that the IRS received the tax money they are due, and as such has little reason to go poking around for details. The other says that the FBI or some other agency may pick up the scent of a "ficticious business" as part of their terrorist anti-money laundering investigations, and sic the IRS on the case.

    One point which is not in dispute is the difficulty of taking dancing related business expense tax deductions under the heading of a 'pet-sitting' business ! A 'bachelor party' business would avoid this problem. Both create a potential problem generating documentation to back up the premise that the business is an actual going concern.

    Also, reporting your dancing tip income under the guise of a 'ficticious business' does not alter the fact that you clubowner and all the dancers working at the club are in violation of IRS law in regard to the LEGAL requirement that tipped income of tipped employees must be reported to the employer and handled through the employer's payroll system. If the IRS ever latches onto this, the fact that you had in fact declared some tip income and paid taxes on it through a 'ficticious business' may decrease the monetary 'damage', but I'm not sure that it does anything to decrease the potential legal damage (and may actually make it worse).

    Again, the clubowner/employer has no legal responsibility to force employee dancers to report their tip income, so he will not be hurt too badly should the IRS start poking around. Wilfully discouraging dancers from accurately reporting their tipped income to the club is of course another story - if it can be proven, of course. But it is the employee dancers who are directly breaking the tax law by not reporting their tipped income to the club so that it can be handled through the club's employee payroll system, and it will probably be the dancers who will bear the brunt of any future IRS investigations.

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    Default Re:Tax dilemma! Don't want to get my club in trouble...

    Quote Originally Posted by tory_ann link=board=6;threadid=13164;start=msg171589#msg171 589 date=1094626141
    Okay, here's what's going on...just started back at my old club. We get paid $9 an hour plus tips. Every payday, they have us write on a sheet of paper our "tips" - well, okay, about 7 - 10% of our tips, and that is what we get taxed on. All of the girls do it this way, because it is what we are told to do.

    I want to claim all of my tips, though. My husband and I would like to be able to move into a higher tax bracket, buy a new house, etc., and we want everything to be on the up and up. If I write all of my tips on this sheet of paper at work, and I am the only girl being taxed for such a high amount, I think it will raise a red flag where the IRS is concerned, and my employer could potentially get into trouble because of it. I don't want that.

    So my husband has been doing some research and found out that it is not legal for your employer to ask you to claim only 10% of your tips. If you make more than $20 a month in tips, you MUST report your tips in full to your employer by the tenth of each month on IRS form 4070 (I think that's the right one). I would love to be able to do this, but again, I fear the IRS coming down on my employer. Also, I really don't want to be the first person to go to him and say, "Hey, I want to do things differently than everyone else. I want to claim all of my tips." Why should I get preferential treatment, you know? Why must I set myself apart?

    Does anyone have any advice on what I should do, or how I should approach my boss about this? While everyone else at my club may be content claiming such a low percentage just because they don't want to pay in, I am not comfortable doing so. But am also not comfortable asserting myself to my boss.

    My husband came up with a pretty good proposition he thinks my boss may go for. If I can ask him to still pay me the wages but not in the form of a check...in cash, with no paper trail...then I can claim my wages as "tips" and claim 100% of my tips, while calling myself an "independent contractor." That way, no red flags for the club, I am basically not even listed as an employee, and I get taxed on all of my income.

    I hope some of you have some insight..it's frying my brain right now!

    What should I do?
    Let's start with what you should NOT do first, K? You should NOT, under any circumstance, try to cut a deal with the club along the lines of the one your husband's come up with - in addition to the various sections of the tax code that not only the Club, but you (and your husband as well, if you file jointly) would be violating, anytime you get together with someone else and start TRYING to circumvent the code it becomes a "conspiracy." Difference being: can USUALLY negotiate your way out of tax crap, i.e., IRS' goal is money, and they use criminal statutes to leverage same out of you, so if agree to high enough payback number in a settlement with them, they'll normally forego prosecution; on the other hand, about the only thing the government will be willing to negotiate with you re "conspiracy" is your cooperation in their prosecution of the Club in exchange for your being allowed to plead guilty to a lesser felony and walk away without doing any time.


    Will look at rest and post again after.
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    Default Re:Tax dilemma! Don't want to get my club in trouble...

    Quote Originally Posted by tory_ann link=board=6;threadid=13164;start=msg171589#msg171 589 date=1094626141
    What should I do?
    Truthfully? Bite down hard and live with things just the way they are. Anybody gets too far from the "norm" ya'll have already set, and the s***'ll start flying - you're stuck, they're stuck, and the other dancers are stuck. Sorry.

    PS - think long and hard before you say ANYTHING AT ALL to Mgr about any of this; if you nevertheless do decide to say something to him re any aspect of this matter, beware of the danger of his interpreting same as an implicit threa; and finally, whether it happens accidentally (i.e., you raise, he misinterprets) or because of your intentional acts (i.e., you actually try to leverage on basis of what you know), should you find yourself being "let go" from the Club, don't even bother trying to get even with "what you know...," 'cause (1) you'll implicate yourself in the process; (2) you'll implicate all of the other dancers as well; and (3) this ain't their first rodeo, and I can promise you there's more than one set of books...
    "That's your answer Old Man? I guess you're a Hard Case too...."
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    it's that you can always see it coming, but you can never stop it.
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    Default Re:Tax dilemma! Don't want to get my club in trouble...

    don't even bother trying to get even with "what you know...," 'cause (1) you'll implicate yourself in the process; (2) you'll implicate all of the other dancers as well; and (3) this ain't their first rodeo, and I can promise you there's more than one set of books...
    Truer words were never spoken ! This is potentially even more risky with some specific clubowners ... who have the "business connections" to insure that such potential witnesses for the prosecution never get a chance to testify, if you catch my drift. I leave the matter to your own good judgement in regard to the sort of potential "business connections" your clubowner might have ! If there's any chance whatsoever that a dancer raising questions about the club's payroll system and tax reporting might be perceived negatively, DON'T EVEN TRY !

    If you're looking for constructive advice, I would recommend strongly considering parting ways with this club ASAP and establishing yourself with a different club. This way the total amount of "undocumented" tip money you earn at this club will probably stay small enough to fly "under the radar", other income from a different club will allow you to file a legitimate independent contractor tax return etc. The longer you continue to earn "undocumented" tip money at this club, the deeper your potential problems will become.

    If you choose to stay at this club i.e. "bite down hard and live with it", be aware that the IRS, FBI and other agencies have lots of automatic financial reporting links to banks, investment brokers, state real estate title and motor vehicle title agencies, etc. If your "official" income is limited to a $200 paycheck, it's very important that you don't create other financial records which would be inconsistent with a $200 a week income ! This means no bank deposits over $100 a week, no stock portfolios or retirement funds, no new car payments, no mortgage payments, etc. Any "undocumented" tip money you earn has to stay undocumented, otherwise you risk being red flagged by IRS computers for spending more money than you have reported earning in the first place. This also means that "undocumented" tip money cannot be listed as part of your income on loan or mortgage applications, of course. This constraint is lessened a bit if you are married and file a joint tax return, because the 'threshold' then becomes his income plus your reported income instead of just your reported income.

    If you choose to report your tip money via a "ficticious business", this indirectly creates an official record which could potentially be used to prove that you and your clubowner have broken the law. The odds of this happening are probably quite small, but the chance exists nonetheless that it may be discovered someday.

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    Default Re:Tax dilemma! Don't want to get my club in trouble...

    Well, in my case anyways it's not a "fictitious" business, it just doesn't earn as much as I claim. I'm mostly just dancing one day a week, so it's not a huge difference... anyways, I'm happy with it and so far it works for me.
    I have to agree with your accountant that if your 'other' business does have legitimate earnings and transaction documentation of its own, and that you are tacking on one night's worth of club earnings per week to earnings the business already has, that the risk of potential problems is low. But this would be a different story for other girls who try to use this technique in regard to a "ficticious business" , where the business transaction documentation is sparse or non-existant, and where the vast majority if not all of the earnings attributed to that business actually come from tip income as an employee dancer !

    In this counter-terror age, the principle of taking illegal/undeclared money from an undeclared source, and funneling it through a "ficticious business" in order to create what are apparently legitimate earnings which can then be used for whatever 'legal' purposes, is called Money Laundering ! As a result of the Patriot Act, the FBI and IRS are specifically investigating such setups as this is how many would-be terrorists operate their finances inside the USA.

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    Default Re:Tax dilemma! Don't want to get my club in trouble...

    Since I am not a dancer, and my friends are including a family member

    do you all claim exactly what you make? I am sure that this will draw fire because it's on a public forum but

    I waited tables and I can honestlyl say that I never was exactly honest


    sorry to sidetrack, just curious.

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    Default Re:Tax dilemma! Don't want to get my club in trouble...

    do you all claim exactly what you make? I am sure that this will draw fire because it's on a public forum but
    I waited tables and I can honestlyl say that I never was exactly honest
    In my own case, yes I report all of my earnings. However, I really don't have a lot of choice in the matter since much of my own earnings stem from modeling, website/webcam, stocks and options, money market interest etc. which are all automatically reported to the IRS anyhow. Very little of my personal earnings fall in the category of "undocumented cash payments" stemming from club dancing.

    I really have no answer to your question, other than to point out that in your average strip club dressing room there are perhaps 10-20% of dancers who understand the concept of estimated taxes, and how to report and pay them !!!

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    Default Re:Tax dilemma! Don't want to get my club in trouble...

    I have to apologize fro Briar, I think she was referring to me in her post. We argue all the time about what i should report. I report everything, she says I'm crazy.


    lol

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