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Thread: stripper deductions

  1. #1
    IACali
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    Default stripper deductions

    anyone know of a website where I can find out the details of which items I can deduct as a business expense as a dancer? I'm going legit for 05, gonna pay quarterly and all that, and would like to know as I go which receipts I should keep. Travel, obviously, but I'm thinking along the lines of beauty products, clothing, physical fitness, etc.....

    TIA!
    cali

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    Default Re: stripper deductions

    Well the first issue is whether the club you are working at treats you as an 'employee' or as an 'independent contractor'. If you are an 'employee' receiving a weekly paycheck, tax law limits the permissible deductions to those which qualify as "employee business expenses" - basically only costumes and shoes.

    Assuming that you are an 'independent contractor', you can deduct general business expenses. The first 'test' for allowable general business deductions is called the "housewife test" - i.e. is the expense you are attempting to deduct something that a housewife (who has no legitimate business reason to do so) would also spend money on ? The "housewife test" usually disqualifies deductions (or some percentage of deductions, balancing the 'housewife test' versus 'ordinary and necessary' business expenses) for health club memberships, hair and nails, makeup, tanning salons, normal sized breast implants, etc. which housewives spend money on every day.

    The "housewife test" also applies to clothing, with things like bikinis and dresses being questionable because they can also be worn in non-business settings.

    In regard to travel expenses, the IRS has specific rules about this. Generally, if you live at a "home" address and drive a few miles to local clubs, the IRS is likely to question your travel expenses. However, if you do road trips such that you have hotel and restaurant receipts to go along with lots of miles of driving to work in out of town clubs, the travel expense deductions will probably not be questioned.
    Last edited by Melonie; 01-19-2005 at 07:23 AM.

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    Default Re: stripper deductions

    this is from a tax law firm's website ...


    Understanding Small Business Tax Deductions

    Thankfully, you can reduce your tax burden by deducting most of what you spend in the course of business.

    How tax savvy a businessperson you are has a great effect on how much money is in your pocket at the end of the year. You probably know that the tax code allows you to deduct costs of doing business from your gross income. What you are left with is your net business profit. This is the amount that gets taxed.

    So knowing how to maximize your deductible business expenses lowers your taxable profit. To boot, you may enjoy a personal benefit from a business expenditure -- a nice car to drive, a combination business trip/vacation and a retirement savings plan -- if you follow the myriad tax rules. The balance of this article deals with the best ways to get the biggest business expense deduction bang for your buck.

    Business Operating Expenses

    We won't burden you with a lot of tax code sections, but hear us out on this one. IRC § 162 is the cornerstone for determining the tax-deductibility of every business expenditure. It is fairly lengthy, but the first hundred or so words are the key:

    "Internal Revenue Code § 162. 'Trade or business expenses.'

    "(a) In general. There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including

    "(1) a reasonable allowance for salaries or other compensation for personal services actually rendered;

    "(2) traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business; and

    "(3) rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity."

    Section 162 goes on -- and on -- but the rest of it deals with specific items that can't be deducted. Those with relevance to small businesses are covered later. Other code sections contain specific rules for deducting purchases of assets used in your business -- machinery, cars and a thousand other things.

    In most cases, a legitimate business expense under IRC § 162 is obvious. In some cases, such as outlays for travel, the IRS provides specific instructions for determining whether or not an expense is "ordinary and necessary." This is often done through various IRS publications ("pubs") and "regulations."

    Like the rest of the tax code, IRC § 162 is far from crystal clear. Starting with the meaning of "ordinary and necessary," we suspect that things could go wrong for us. The tax code doesn't define either "ordinary" or "necessary." Instead, federal courts have tried to figure out what Congress intended and apply it to a particular set of facts. "Ordinary" has been held by courts to mean "normal, common and accepted under the circumstances by the business community." "Necessary" means "appropriate and helpful." Taken together, the legal consensus is that "ordinary and necessary" refers to the purpose for which an expense is made. For instance, renting office space is ordinary and necessary for many business folks, but it is neither unless it is actually used in running an enterprise for profit.

    Given these broad legal guidelines, it is not surprising that some folks have tried to push the envelope on "ordinary and necessary" business expenses, and the IRS has pushed back. Sometimes a compromise is reached, and sometimes the issue is thrown into a court's lap.


    Example
    Mr. Henry, an accountant, deducted his yacht expenses, contending that because the boat flew a pennant with the numbers "1040," it brought him professional recognition and clients. The matter ended up before the Tax Court. The court ruled that the yacht wasn't a normal business expense for a tax pro, and so it wasn't "ordinary" or "necessary." In short, the yacht expense was personal and thus nondeductible. (Henry v. CIR, 36 TC 879 (1961).)

    The laugh test. Tax pros frequently rely on the "laugh test": Can you put down an expense for business without laughing about putting one over on the IRS? In the example above, the Tax Court laughed the accountant and his yacht out of court.

    Large Expenses

    Because the IRS knows that people don't intentionally overpay for anything, amounts paid aren't usually questioned. However, IRS auditors sometimes object to expenditures deemed unreasonably large under the circumstances.

    While the tax code itself contains no "too big" limitation, courts have ruled that it is inherent in IRC § 162. For example, it might be reasonable for a multi-state apparel company to lease a jet for travel between manufacturing plants, but not for a corner deli owner to fly to New York to meet with her pickle supplier.

    Personal Expenses

    The number one concern of the IRS when auditing business deductions is whether purely personal expenditures are being claimed as business expenses. For instance, you can't deduct the cost of commuting to work, because the tax code specifically says this is a personal, not a business, expense. Ditto with using the business credit card for a vacation or cruising the beach in the company car. Because such shenanigans are common, IRS auditors are ever watchful.


    Fortunately, you can often arrange your affairs -- legally -- in a way that lets you derive considerable personal benefit and enjoyment from business expenditures.

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    Default Re: stripper deductions

    I have a CPA that I refer people to and he also speaks at our seminars. He's a bit more aggresive at deductions than most but he sticks to the "bend, but don't break" rule pretty good so there are no red flags for the IRS. What he teaches is that as a dancer, you can deduct anything that falls under one of three categories. Business, Modeling and Performance. If anything falls under any of those categories, it's a deduction. Here are some examples:

    BUSINESS DEDUCTIONS

    Computer
    Money management software
    Misc. office supplies
    Seminar training or educational material
    House Fees
    Website

    MODELING

    Most cosmetics
    Most clothing
    Some plastic surgery
    Hair & nails
    Tanning

    PERFORMANCE

    Costumes
    Props to use on stage
    Chiropractic bills
    Massages

    This is kind of a base to go by and there are a lot of grey areas. For example, we've done a lot of research into this and most accountants I talk to say that the "housewife" rule doesn't apply to dancers about 90% of the time. Just because you are only going from an A to a B cup doesn't mean you don't qualify for a deduction if you are 4'11" and weigh 95 pounds. So you have to ask yourself if augmentation will either enhance the performance or the modeling aspect of your business. In the majority of cases, it does. Here's another deduction often overlooked...tattoos! Having a small one on your back or ankle won't help you here, but let's say you have a lot of tatoos. You can easily make the claim that it enhances the performance category because you are going for a goth theme as a dancer. There's your deduction. Also, ANY forms of tatoo removal are deductions because it falls under the Modeling category.

    Other deductions include a pager that you might use for customers to contact you. If it's used for business, it's a deduction. Transportation to and from your club is not a deduction because it's considered standard commuting. HOWEVER, let's say you drive around the country going from club to club, that's a deduction...your mileage, gas, etc. Even airfare and hotel stays are for the nights you work if you are dancing one or two nights on a vacation somewhere. You just have to itemize your trip.

    Your best bet for all of this though is to just hire a good accountant who can explain all of this in detail. The guy we use in our program and for myself is just awesome so if you need his number, just PM me.

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    God/dess Emily's Avatar
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    Default Re: stripper deductions

    Now this is confusing...you and Melonie are stating two diffferent things in regard to cosmetics stuff.

    P.S. I never got a receipt from my dancerwealth class!

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    Default Re: stripper deductions

    Hi Emily. First, if you paid for our class via credit card, you would have had a receipt emailed to you immediately after payment. If not, shoot me an email to [email protected] with your specifics and I'll take care of it immediately.

    Second, cosmetics are absolutely a deduction because it falls out of the "housewife" clause. You can't just deduct all of it, but some you can. I would say 60%. This falls under the modeling qualification. You need to have the makup to do your job effectively so how anyone can deny that's not a tax deduction is beyond me. It's not about writing ALL of it off, just most. It's about how you itemize, not break the rules.

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    Default Re: stripper deductions

    The last accountant I spoke with said that the "housewife test" isn't entirely correct. It's a model to go by, but that in the end...if you couldn't do your job WITHOUT the stuff you buy...then when you buy it, it's a deduction. So...the MAC make-up that was purchased for my dancing is deductible...as were all the clothing/costumes/shoes, etc. The housewife test is a grounds by which to build...but these days...housewives go out and buy MAC cosmetics for every day use. SO...in the end...what you decide to deduct (within reason) is anything that you purchase with the purpose and intent of using in your business.

    The implants are something I'm wondering about. I'm a mommy who breastfed...so, my boobs...although not bad looking could really be perkier. HOWEVER, would I be able to get a deduction saying that it's for work...if I wouldn't normally get a boob job if I wasn't a stripper? Image is everything in this line of work, sooooo...

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    Default Re: stripper deductions

    Now this is confusing...you and Melonie are stating two diffferent things in regard to cosmetics stuff
    the confusion, unfortunately, originates with conflicting IRS rules ... and ends with the decision of an IRS agent if and when you are audited. As posted by myself and others, what usually flies is claiming a percentage of these gray area deductions as business related but not 100%.


    The implants are something I'm wondering about. I'm a mommy who breastfed...so, my boobs...although not bad looking could really be perkier. HOWEVER, would I be able to get a deduction saying that it's for work...if I wouldn't normally get a boob job if I wasn't a stripper?
    In the case of breast implants, there is a previous IRS 'letter ruling' which applies. When congress first passed legislation stating that elective plastic surgery was non-deductible, feature dancer Cynthia Hess a.k.a. Chesty Love took the matter to tax court ... and won. The IRS judge ruled that because the size of her implants was clearly out of the range chosen by 'housewives' that they were exclusively for business purposes thus a legitimate business expense. Thus following the same logic behind the ruling, any dancer who gets implants larger than those generally chosen by housewives (i.e. 1000cc or more) can deduct 100% of the cost. Dancers getting implants smaller than 1000cc and attempting to take a business expense deduction for them may run afoul of the specific legislation passed by congress which declared elective plastic surgery to be non-deductible. Dancers getting implants smaller than 1000cc are in a worse position than the gray area deductions BECAUSE of the specific legislation passed re elective plastic surgery, but may still be able to catch a break if audited depending on how closely they allow the IRS agent to inspect those implants I suppose LOL.


    The point which really needs to be understood in the case of business expense deductions and 'less than fully documented' cash income is that, when audited, everything that isn't covered by 'cast in stone' financial documentation and 'cast in stone' IRS regs and rulings, boils down to a 'negotiation'.
    Last edited by Melonie; 01-19-2005 at 05:34 PM.

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    Default Re: stripper deductions

    Ok...well, then by those "housewives" standards...none of my lingerie, make-up, etc would be considered deductible since there are some housewives out there that will purchase that same stuff. So, how does that work? I'm an entertainer...I need certain things in order to achieve that end...so shouldn't anything that I buy that I use at work regardless of who else purchases the same thing for personal reasons be deductible as a business expense? It's not like I'm sitting at home PRETENDING to be an entertainer so I can get implants (or buy all these shoes, make-up products, etc). Why does this have to be so damn confusing?

    BTW...how would they KNOW you deducted for implants? Really, if you are an independant contractor who is self-employed and you say that you had these legitmate business expenses...would that trip an audit? Would the amount of the deductions alone trip the audit or would it just have an increased chance of doing so?

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    Default Re: stripper deductions

    I don't know about deducting vehicle expenses as a dancer, but certain SUVs are 100% deductible for contractors and I would assume since dancers are contractors perhaps it would apply.

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    Default Re: stripper deductions

    Those vehicles that are deducted by those contractors are used specifically for that job. As a dancer, you need your car, but chances are, you are not using your car completely for work. As an independant contractor, you can deduct wear and tear, mileage, etc...but deducting the full cost of the car would not work. BIG red flag...

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    Default Re: stripper deductions

    BTW...how would they KNOW you deducted for implants? Really, if you are an independant contractor who is self-employed and you say that you had these legitmate business expenses...would that trip an audit? Would the amount of the deductions alone trip the audit or would it just have an increased chance of doing so?
    Well, if the IRS released specific technical info like this, CPA's would be able to do land office business. However in the case of breast implants, this constitutes a specific business investment which must be capitalized and depreciated over three years (exception section 179 election you can claim it all in one year with certain restrictions) and it must be specifically stated as such. This certainly would raise the subject to the IRS of possibly improperly deducting elective cosmetic surgery expenses, as implant is a potential 'keyword'.

    As to more general types of business expense deductions, it is my understanding that the IRS compares deduction percentages of individual income tax filers against average deduction percentages for all filers in the same classification, with any major deviations increasing the chance of audit. $5-6-7k for breast implants is a fairly large chunk.

    As an independant contractor, you can deduct wear and tear, mileage, etc...but deducting the full cost of the car would not work. BIG red flag...
    Auto expenses are another potential 'keyword'. Similar to breast implants, congress has specifically legislated that auto expenses involved in COMMUTING between home and work are NOT an allowable business expense - independent contractor or not. Thus if a dancer does road trips, spends several weeks per year working in out of town clubs, staying in hotel rooms, and driving thousands of miles between cities, then deducting the purchase of an auto plus deducting mileage or actual gas/maintenance expenses is totally legitimate. However, if a dancer lives and works in the same city, and never works in out of town clubs requiring an overnight hotel stay, then her auto expenses by definition are personal not business and therefore any attempted deduction would raise red flags.

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    Default Re: stripper deductions

    Quote Originally Posted by Melonie
    Auto expenses are another potential 'keyword'. Similar to breast implants, congress has specifically legislated that auto expenses involved in COMMUTING between home and work are NOT an allowable business expense - independent contractor or not. Thus if a dancer does road trips, spends several weeks per year working in out of town clubs, staying in hotel rooms, and driving thousands of miles between cities, then deducting the purchase of an auto plus deducting mileage or actual gas/maintenance expenses is totally legitimate. However, if a dancer lives and works in the same city, and never works in out of town clubs requiring an overnight hotel stay, then her auto expenses by definition are personal not business and therefore any attempted deduction would raise red flags.
    Ahhhh...I was under the impression that since an IC would need to commute home/work/home...that that would entitle them to the mileage/toll deduction for going to and from the club, regardless of where they work. I thought the only time you could not deduct that was if you were considered an "employee" by the club you are employed at. Dammit...it's all so confuzzling.

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    Default Re: stripper deductions

    The reason that commuting to the club isn't a deduction Venus is because it involves normal transportation to and from your location of work. That's not a deduction for anyone unless it's abnormally long distances or for unusual circumstances. For example, someone driving to work at a salaried job cannot deduct his travel expenses to his/her place of work. HOWEVER, if the employee is asked to run errands for the company on company time, then the employee has two options. Either they can be reimbursed by the company for gas and maintenance like many companies do, or if the company does not compensate them, then the employee can take this as a tax deduction. They even make mileage log books you can buy at most office supply stores for this. Then, if you exceed a certain amount of mileage per year, the IRS has a formula you can use to determine the accurate amount of money to deduct. With the IRS it's all about semantics and many times they are easier to work with than you might thing, it just has to be accurately documented and verifiable that it's for a real business expense. I remember two years ago a friend of mine was audited by the IRS and on one of his tax returns, the wrote off a laptop computer. He didn't have a receipt for the laptop to show the IRS, but he had the physical computer to show them, and the IRS was completely fine with it.

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    Default Re: stripper deductions

    So would a commute between austin and Houston be deductible? Its over 100 miles apart?

    And if I flew to work in a different city, I presume car rental and gas are also deductible?

    Recently, a source in the business for years told me that the housewife test was also not really used. For instance, would I be buying fake eyelashes and hair extentions plus those this $25 thongs as a civilian?? Probably not....

    This is going to be tough, I need a special accountant........

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    Default Re: stripper deductions

    yup business travel to a different city is not considered 'commuting' unless it is your ONLY place of business and you make the trip daily. Air fare, taxi fare, car rental, hotel bills, restaurant bills etc. are all acceptable business expense deductions.

    Again, applying the "housewife test" and trying to disallow 100% of such a deduction is the IRS's worst case argument. Taking a position of claiming a 100% legitimate business deduction as an "ordinary and necessary" business expense is your own best case argument. When audited, "reality" winds up being negotiated and usually lies at some percentage in between. However, claiming 50% or 67% or even 75% of the total amount as a business deduction plus the balance being non-deductible for personal use/benefit, instead of claiming the entire 100%, will probably reduce the chances of audit considerably.

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    Default Re: stripper deductions

    My understanding of the mileage rule was already stated in the out of town explanations but also if you work for a strip-o-gram service and go to their office (to pick up party info and directions, for example) and then drive to each booking, you can deduct from their building to each booking and back to their building at the end of the night. The from your house to work and back again part is what you can't deduct.

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    Default Re: stripper deductions

    I am allowed to deduct all my work related mileage because I don't work in one place every day and therefore it's not considered a commute. I might work in the same place all week but it's still okay, at least according to my CPA. I would think if a stripper doesn't work in one club over and over but travels to different ones the same would apply. I would check with a cpa though to be sure.

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    Default Re: stripper deductions

    Something we all forget is that you can deduct ANYTHING you want. Its only an issue at question IF you are audited. Then if it is dis-allowed you MAY have to pay a small % of the deduction as additional tax and penalty. As long as you are prepared to prove that its a business expense, I say deduct it.

    IRS Tests (like Melonies favorite "Housewife" test) are not IRS Rules. An example is baby wipes for the dancers (who use ALOT of wipes). Now IF the dancer has no children its obvious that the use of massive wipeage is business related. If that dancer has 4 kids under the age of 3 then the IRS may wonder but the possibility still exists that the wipeage is business related and therefore deductable. Applies to lots of other things.

    Its not as cut and dried as some make it seem.
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    Default Re: stripper deductions

    Its not as cut and dried as some make it seem
    Agreed - when audited it comes down to a negotiation. However, 'flagrant' deductions do affect the risk of being audited.

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    Default Re: stripper deductions

    all I can tell you is to look up the tax court 'letter ruling' of IRS versus Cynthia Hess (a.k.a. feature dancer Chesty Love), which is the latest ruling specific to dancers and breast implants being deducted as a business expense. The key points of her successful argument were #1 that business reasons dictated her implants must be large enough that they were well beyond the size range which women in general get by the hundreds of thousands per year for purely personal benefit, and #2 that because her implants were significantly larger than 'housewives' implants that they actually resulted in negative reactions in some everyday settings rather than positive reactions (thus proving their purpose as being primarily business related).

    According to my accountant there was no mention of the specific size of Chesty Love's implants (which from her pics I would guess to be 4000cc each), but the tax court clearly drew a line of distinction based on implant size. With the largest catalog sized implant available to 'housewives' being 800cc, it is my accountant's opinion that dancers attempting to deduct implants in the 1000cc plus size range will not be questioned, but dancers attempting to deduct implants in the 800cc and under size range may very well be questioned - with part or all of the deduction being disallowed as a personally beneficial elective surgery per congressional legislation specifically declaring 'elective' surgery to be 100% non-deductible.

    My account tells me that if a girl does get 'normal sized' implants which are clearly much smaller than the 1000cc 'professional size' dividing line, that she is really only safe in trying to deduct them as a 'medical expense' if her doctor agrees that the reason for her getting the implants was in fact to correct some medical condition i.e. ptosis, tubular breasts etc. therefore medically indicated rather than purely 'elective'. It was this same specific congressional legislation which is now also allowing some states to begin to charge a 'sin tax' on 'elective' surgery procedures, because per that congressional legislation purely 'elective' surgery is not considered a necessary medical expense, period.

    Again, like every other deduction, if a taxpayer doesn't give themselves the benefit of the doubt and try to claim a deduction they won't get any savings on their taxes. But on the other hand if a taxpayer does give themselves the benefit of the doubt, and particularly where they attempt to take a 'gray area' deduction where the dollar amount is a significant percentage of the taxpayer's gross income i.e. breast implants or other cosmetic surgery, the probability of that taxpayer's tax return being flagged for audit rises exponentially. When a taxpayer's return does give rise to an audit, then EVERYTHING on that tax return, and potentially everything on the tax returns for the two preceeding years, is subject to scrutiny - not just the questionable deduction which triggered the audit.
    Last edited by Melonie; 01-29-2005 at 02:40 AM.

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    Default Re: stripper deductions

    Can you deduct the house fee and tips you pay out every night? If so, how would one get a receipt for this (or do you even need one?) Is the cost of your dancers's permit deductible? In the city where I work I also had to purchase an "independent contractors business permit". I simply assumed that at least my permits would be deductible, but now I'm questioning it.

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    Default Re: stripper deductions

    as an 'independent contractor' you can indeed deduct any necessary costs of doing business - including any business license fees, any fees you are required to pay to the club in order to work there (house fees are legally a form of rental I'm told). All of these types of business expenses have a place to be entered on Schedule C of your sole proprietor business tax return.

    The muddy area arises in regard to tipouts. If the mandatory tipouts to DJ's, bartenders etc. are being paid to people who are employees of the club then yes they are deductible. However, if the tipouts are being paid to DJ's, bartenders etc. who are actually independent contractors and not employees of the club then legally speaking unless you issue them a 1099-misc your tipouts are basically non-deductible gifts ! Fortunately my accountant tells me that the IRS probably won't notice this fine point unless the tipouts run into thousands of dollars per year.

    In regard to receipts for stage fees and tipouts, I'm told that as long as you keep a business journal which appears to be fair and accurate which lists your club earnings, stage fees and tipouts, that the IRS will usually accept your journal entries alone without the need for actual receipts.

  24. #24
    Member Nikki Lee's Avatar
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    Default Re: stripper deductions

    Deductions that I know of. My SO has also worked as an independent contractor in the past in the racing industry, so, I'll throw his in too.

    Clothes
    Food at work
    Travel. You get a better deduction for mileage, than what you get for saving gas receipts.
    make-up, hair products
    computer
    the internet. you come on stripper web, so, the internet is a deduction
    any magazines or publications you may get if they are related to dancing in any way
    housefees
    home office. envelopes for bills, paper for your printer, etc
    health insurance
    some deductions can be taken on vehicles, and vehicle maintenance. it helps to have 2 vechicles, one for work, one for pleasure

    most importantly, find a good accountant that is trustworthy, and will look out for your own good.
    Yes, it's Fast. No, you can't ride!

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    Default Re: stripper deductions

    I would add that trying to take a deduction for your computer, for internet access ISP charges, and/or for a home office are contingent on those expenses actually being used for business purposes - i.e. being used in some way which results in your income being increased. This would certainly be the case if you're actively doing webcam work or operating a website which sells monthly memberships or products where you directly receive checks as a result of your internet work. This MIGHT be the case if you are e-mailing club customers but not directly receiving checks from your internet work (on the premise that your e-mails result in more customers coming to the club thus increasing your club earnings). However, this is probably NOT the case if your computer & internet use do not result in extra income of some form - in which case the computer, ISP and home office deduction would probably be disallowed as personal use.


    Also, there is IRS precedent that deductions for clothes, hair products, makeup etc. are also subject to the personal use 'housewife' test. Thus taking a deduction for an outrageous gown might be allowed whereas a deduction for a bikini would not (housewives buy bikinis and wear them to public beaches). Same is true for the others i.e. blue hair color might be allowed whereas a deduction for shampoo and conditioner would not, and theatrical makeup receipt would be allowed whereas a WalMart makeup receipt might not.

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