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Thread: Saving for taxes

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    Senior Member Abbeynormal's Avatar
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    Default Saving for taxes

    Hello all! I've been writing down everything that I earn, and everything that I have to pay, but my question is this. Should I put any money back that I'll have to pay come April 15th? I've thought about putting a little back each night towards paying Uncle Sam. Any suggestions? Thanx!
    "This above all: to thine own self be true."

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    God/dess Emily's Avatar
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    Default Re:Saving for taxes

    Your question is kind of confusing.

    Put money back how and where? You should definitely set aside money each night or week or some small increment for taxes. Do this first before paying other bills.

    Also, are you paying quartlery? it's different when you're not an employee and you have to make tax payments 4 times a year.

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    Banned Melonie's Avatar
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    Default Re:Saving for taxes

    Abbey, federal and state estimated tax payments for independent contractor income earned in the months of June, July and August must be sent out to the IRS and state tax agencies by TOMORROW ! Fortunately for you, the state of Texas does not have a direct income tax, so all you probably owe is 20% of your total gross earnings during June, July and August for federal income tax. The next estimated tax payment for income earned in the months of Sept, Oct, Nov and Dec is due next January 15th. Finally, your annual tax return and estimated tax payment for income earned in Jan, Feb and Mar is due on April 15th.

    If you have not been making estimated tax payments throughout the year, when you actually file your tax return next April you can be hit with a penalty plus an interest charge on top of the money you send in with your tax return.

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    Default Re:Saving for taxes

    I had a day job and danced P/T. I just withheld an extra couple of hundred from my regular paycheck. I had to attach a schedule C and a schedule SE, but I ended up getting money back in the end due to mileage, etc.

    I never made quarterly payments and was worried, but my CPA was not. I DID pay in taxes as I went, but still...

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    Banned Melonie's Avatar
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    Default Re:Saving for taxes

    If you have your own "day job" where you are considered to be an employee and where income taxes are withheld from your weekly paycheck, the IRS is perfectly happy with the idea of increasing the amount withheld by your employer every week to reflect the estimated taxes due on dancing earnings as well. The same is true for married dancers who file joint tax returns - hubby can increase the amount of taxes withheld from his paychecks to reflect the estimated taxes due on the wife's dancing earnings.

    The principle behind paycheck tax withholding or estimated tax payments is that the IRS wants their percentage of your income to be paid a lot more often than once a year. In reality they'd like to get paid every week so that the government can spend your tax money instead of having to borrow even more money to pay it's own bills ! With employee tax withholding, the employer sends the IRS a check for the tax money withheld from employees every week. With independent contractors, because of the bookkeeping requirements to figure out earnings and estimated taxes on those earnings, the IRS is willing to wait some and get a check every 3 months.

    The IRS gets upset though when they have to give a taxpayer "free use" of money which is due to them as income taxes. Therefore if a dancer were to not make any payments to the IRS other than sending a check with her tax return on April 15th, the IRS is going to charge her interest on the tax money she got to use "for free" throughout the previous year, plus tack on a 10% penalty charge as their way of saying 'don't do it again' !

  6. #6
    Rebuildme
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    Default Re:Saving for taxes

    The IRS wants to be paid quarterly.........I cried everytime I wrote the check.

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    Rebuildme
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    Default Re:Saving for taxes

    You should put aside at least 30%.................

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    Member Bellina's Avatar
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    Default Re:Saving for taxes

    I've been putting aside 25%. I hope it's enough...maybe I should increase it.

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    Banned Melonie's Avatar
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    Default Re:Saving for taxes

    this of course depends on the amount of gross income you have, your marital or emancipation status, as well as what sort of state and local taxes are applicable to that income.

    federal income tax brackets can be found at

    state income tax brackets can be found at

    also, on top of these two taxes you'll have to pay about a 15% self-employment tax which takes the place of Social Security taxes paid by employers and employees.

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    Default Re:Saving for taxes

    Is it true that the first $6000 is not taxed? For example, if you made $25,000 the above percentage rates would be applied to $19,000?


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    God/dess montythegeek's Avatar
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    Default Re:Saving for taxes

    Rates apply to adjusted gross income for income taxes. Social security and medicare do not use AGI because there are not deductions for that.
    See http://www.irs.gov/publications/p505/ch02.html#d0e3998

    I think the linke will get to the right section.
    The title is "how to figure estimated taxes".

    If you are lazy and cheap (as opposed to just cheap) you can get a copy of a tax prep software for 2003 like turbotax or tax cut and they can do estimated taxes. Cost $20 or so.
    If you are just cheap, use the MsWorks program to do the math--it probably came free on the computer you already have. There are also free online tax calculators. I will try to get some links.

    One is http://www.taxcentral.com/EstTaxCalc.asp
    There are also a variety of tools available at this page
    http://shareware.search.com/search?c...h.sa_all&q=tax
    One of them is this
    http://www.download.com/3000-2047-10264588.html
    Another place is http://www.taxact.com/offers/taxact0...asp?sc=0342631

    I have 0 knowledge of these products since I use a piece of commericial pay software. I therefore vouch for none.
    Using the IRS forms is not hard and the math is 8th grade stuff.
    http://www.irs.gov/pub/irs-pdf/f1040es.pdf

    Using a tool like works to do the math for you makes it real easy.

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    Banned Katrine's Avatar
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    Default Re:Saving for taxes

    Just follow the IRS forms and create a spreadsheet in Excel which you can reuse.

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    Featured Member exotica17's Avatar
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    Default Re:Saving for taxes

    What about married dancers in California? Is it best to file jointly or seperately?

    Also, if you are married, then must you still pay quarterly taxes?

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    Banned Melonie's Avatar
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    Default Re: Saving for taxes

    if you are married and file a joint return, the IRS and California state tax people generally treat you and your husband as one person, you and your husband's combined income as one income, and you and your husband's combined withheld/estimated tax money as applying to both of you. Thus if you want to avoid having to file and pay estimated taxes yourself, it is possible for your husband to have his federal and state income tax withholding increased to a level sufficient to cover both of your incomes.

    Remember though that the federal and state tax brackets are progressive - meaning that because you are married that your combined incomes are likely be taxed at a higher rate than if you were not married and you both were eligible to file a single person tax return. It is true that married people can file separate tax returns, but the tax rates are usually even higher than married filing jointly since only one of you can claim to be the "head of household".

    A wild example - your husband earns say a $50,000 annual income, and so do you. Filing separately as single people (which you can't do because you're married), your combined tax rates would probably have been around 20% or $10,000 from each of you. However, if you are married filing jointly on a $100,000 income, your tax rate is more likely to be around 25% or $25,000. This is the so-called "marriage penalty". GWB just signed a law which reduces this marriage penalty somewhat, but I don't think California state law has been changed.

    Thus if your husband wants to increase his paycheck tax withholding to the level of $25,000 per year, you won't have to file estimated taxes. However, on a $50,000 income, this would mean that more than 1/2 his paycheck would have to be withheld (50% of his gross income to federal and state tax, plus another 7% for FICA, plus whatever else for insurance etc.) Some guys are cool with this concept, other guys freak !

    If your husband is not cool with this concept, then yes you will have to file and pay estimated taxes on your own dancing income to both the IRS and the California "franchise board" or whatever the state tax agency is called.

    In your situation, I would highly recommend that you buy a copy of TurboTax (the version for sole proprietor businesses) and let the program calculate your taxes using all the possible tax filing combinations to find the one which produces the lowest total tax liability in your particular financial circumstances. Doing so will also allow you to more accurately estimate your effective tax rate, and help you in deciding how best to handle your estimated tax payments.
    Last edited by Melonie; 10-07-2004 at 03:26 AM.

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    Senior Member Crystal585's Avatar
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    Default Re: Saving for taxes

    I recently just got married and moved to vegas so how does the independent contractor thing work in las vegas. How does the govt know how much I make and do the clubs in vegas report funny money at all since they never seem to pay me knowing who I am. No stage names are taken in the vip room. Plaus I have no schedule and come in and leave when I want to. Technically I could claim 1000 or nothing every night who would know the difference. How does it work in Vegas. Also my husband has a regular job in the city so I dont know how our joint return will be affected by what I do.

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    Default Re: Saving for taxes

    You've just asked the great unknown question - whether or not your club will decide to report payouts made to dancers for private dance and/or champagne room and/or customer credit card charges. By law they're supposed to. However in reality most clubs do not. But the huge risk factor is that if your club DOES decide to report your income via form 1099, you won't know it until the end of January 2005. In the meantime, by law you were required to make four estimated tax payments on this income, on April 15th 2004, June 15th 2004, Sept 15th 2004 and Jan 15th 2005. If a 1099 form from your club shows up in your mailbox at the end of January, and if you haven't made estimated tax payments which explain the income, the IRS has essentially got proof that you have underpaid estimated taxes. This will vastly increase the odds of you (and your husband if you file jointly) being audited.

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    Senior Member Diva's Avatar
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    Sad Re: Saving for taxes

    Quote Originally Posted by Abbeynormal
    Hello all! I've been writing down everything that I earn, and everything that I have to pay, but my question is this. Should I put any money back that I'll have to pay come April 15th? I've thought about putting a little back each night towards paying Uncle Sam. Any suggestions? Thanx!
    Well I find it's best to pay quarterly and when it's time to file your taxes, if you still owe more then your pay-out won't be as much as if you wait till the end of the year cause they will charge you late fees and maybe penalties.
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    Default Re: Saving for taxes

    Thanks, Melonie.

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    Default Re: Saving for taxes

    I was wondering, is it okay to get a "real" job that is taxed and then just put what I made as a dancer under the title "tips"? I had a CPA tell to start saving all of my receipts, but I haven't done that so I was wondering if I could just put it all down as tips that then start the quarterly thing next year and keep a list of everything I bought for the job?
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    Veteran Member Gerina's Avatar
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    Default Re: Saving for taxes

    Thanks Melonie and Monty - you guys have such wonderful advice. I was going to hire a tax guy and then realized how simple it is to do it yourself if you keep track of everything - i opt for an excel sheet. After looking at the brackets from Melonie, I was wondering if I'm doing this right: I set aside 30% of my "gross" income into a money market acount and the rest for use in checking so that it comes to my making about 60,000 a year. I am an employee at my club, so I only have to pay in apr, right? And I live in CA, so this percentage should be enough, right? If it's less than enough and I "magically" come up w/ the money into money market, should I worry about being audited? If you guys could advise, it'd be awesome, thanks

    As a side note, I have been saving all of my deductions, although now I'm not entirely sure it would bring me to a lower tax bracket. Deductions aren't at all taxed, though, right?
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    Default Re: Saving for taxes

    am an employee at my club, so I only have to pay in apr, right? And I live in CA, so this percentage should be enough, right?
    IF you are treated as an employee by your club, and IF all of your tip income is reported to the club such that they withhold state and federal taxes on the tip income as well as your base pay, then yes you only have to file and pay in/get a refund in April. However, if your club does not record your tip income and your club does not withhold taxes on your tip income then you're caught between a rock and a hard place. To cover your own butt, you could make quarterly estimated tax payments on your tip income. However, when you do file your tax return next april, if you or the club is audited both you and the club can get slammed for breaking the law in regard to tip income reporting requirements which both you and they did not follow. The club will also get slammed for not paying their employer's 1/2 of Social Security tax on your tip income, for not paying state workmen's comp on your tip income etc. Therefore if you directly pay estimated taxes for your tip income which was not reported by the club, and you declare a comparatively large amount of tip income on your tax return relative to your base pay, you are potentially inviting an IRS audit of your club, yourself, and all of the other dancers working there (most of whom probably did not report their tip income at all).

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    Veteran Member Gerina's Avatar
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    Default Re: Saving for taxes

    Awesome Good to know at least i'll be okay. My club specifically told me that I didn't have to report my tips, but could if I didn't want to worry about paying an extraordinary amount in taxes at the end of the year, and even then I didn't have to report all of it to them. So I didnt, and I thought I was right about why. I just stay out of their sketchiness, but I've been keeping track of everything I earn to report myself. Taxes have been paid on my wages and I'm being honest about everything else in a paper trail, and I'm thus not too concerned if I get audited.
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    Banned Melonie's Avatar
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    Default Re: Saving for taxes

    My club specifically told me that I didn't have to report my tips, but could if I didn't want to worry about paying an extraordinary amount in taxes at the end of the year, and even then I didn't have to report all of it to them
    I just want to make you aware that by doing this you have placed yourself between a "rock and a hard place". Even though the club isn't requiring that you report all of your tip income to the club, the law does require you to report all of your tip income to the IRS. The law also requires you to report all of your tip income to the club. And the IRS computers cross-check reported incomes from dancers tax returns against reported incomes from club W2 statements.

    In order to avoid a discrepancy when the IRS computers perform a W2 check, your own tax return needs to show a reported income very close to the amount that the club reports on the W2 statement. This means NOT reporting your tip income, which is illegal but which is probably what many dancers actually do. NOT reporting your tip income which wasn't reported to the club makes the IRS computer cross-check very happy and makes for a very low probability of being audited. However, if you ever are audited, you're going to be on record as deliberately under-reporting your income. Also, to the eyes of banks and finance companies, your tip income doesn't really exist, meaning that your credit rating is going to be based on your reported income only less unreported tip income. This also means that you can't really spend this unreported tip income on a house, a car, or any other big ticket item which might lead to IRS computers discovering from state property deed or car title records that you have been spending more money than you reportedly earned in the first place.

    If you DO report all of your tip income on your own tax return, but the club's W2 statement reports a much lesser amount, the IRS computers are going to show a huge discrepancy and greatly increase your probability of being audited. Reporting all of your tip income on your own tax return, with the club's W2 statement showing a much lesser amount, also amounts to legal proof that either you or the club or both of you broke the law in regard to the tip income reporting requirement. An audit being triggered may also result in the club being audited as well, particularly in light of the club under-paying 'employer's' Social Security matching money and state disability/comp money.

    This whole concept of clubs encouraging dancers not to report their tip incomes through the club's payroll system is dangerous to dancers. From the club's standpoint, by minimizing the amount of tip income reported by dancers through the club's payroll system, it also minimizes the amount of Social Security tax, state disability and comp, and other costs which must be paid by the club as a proportion of reported dancer income. Of course if the club or dancers working at the club are ever audited, the club can plead innocence based on the fact that it is up to the dancers to actually report their tip incomes to the club - thus placing all of the 'culpability' on the dancer for under-reporting her tip income to the club as well as to the IRS.
    Last edited by Melonie; 11-06-2004 at 04:54 AM.

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