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Thread: Tax filing status - cont'd from another thread

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    Default Tax filing status - cont'd from another thread

    This stems from my asking my accountant about questions in other threads ...

    For a dancer to file as an 'employee' she must have received a W2 form from her club for her paycheck income and tax withholding. Per recent IRS interpretations and agreements with the Casino and Taxicab industries, legally speaking, any tips or other money which an 'employee' dancer receives directly from customers is supposed to have been turned back over to the club - at which point the club was supposed to record the extra income, withhold the appropriate taxes, and add the net amount to her paycheck. Employee dancers are technically not required to make estimated tax payments since the appropriate taxes should have been withheld on their behalf by the club on any income they earned. Employee dancers may only take Employee Business Expense tax deductions (which includes costumes and shoes but which does not include much else)

    For a dancer to file as an 'independent contractor business' she must NOT have received a W2 form from her club, but instead should have received either a 1099-misc form or no paperwork at all from her club. Independent Contractors must file and pay estimated taxes quarterly, and report their own incomes using 1040 Schedule C Profit or Loss from a Business. Independent contractors are eligible to take any appropriate business expenses.

    If a dancer has received both a W2 from one club and a 1099-misc (or multiple 1099-miscs) from other clubs, then she must very carefully segregate her employee income and expenses from her independent contractor income and expenses and file the W2 income under wages plus each 1099-misc income under a different schedule C.

    If a dancer has received both a W2 and a 1099-misc from the same club this is technically not proper under recent IRS interpretations and settlement agreements. The dancer has no choice but to report the W2 income as if it were from one job and report the 1099-misc income as if it were from a different independent contractor business even though it isn't. However, this is likely to draw extra IRS attention simply because the W2 and 1099-misc forms will show the same business name and employer ID number.

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    Default Re: Tax filing status - cont'd from another thread

    I also asked my accountant about who's potentially at fault in the case where one club issues a W2 for base pay and a 1099 for tip/other income. In this case the club is clearly at fault, since it is going on record and creating official tax documents which demonstrates that it followed incorrect accounting and tax withholding procedures.

    However, in the case where a club issues a W2 which does not include tip income, and where the club does NOT issue a 1099 for tip income, then a dancer who attempts to report tip income in excess of the amount of income shown on the W2 is arguably at fault. The rationale is that the dancer should have reported and turned in her tip income to the club, so that the club could withhold taxes and pay out the net amount in the dancer's regular paycheck. By not officially reporting and turning over tip income to the club, legally speaking, it is the dancer who is guilty of under-reporting her income. In other words, the club can claim 'plausible deniability' in that it was never officially informed by the dancer of any additional tip income having occurred.

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