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Thread: How much trouble am i in?

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    Default How much trouble am i in?

    I started dancing in may '03 at the club i'm at now. i was still living at home and working another job so that my parent's wouldn't know where i was taking their car. when tax season of '04 came along, my dad did my taxes but he claimed my lil sister under my file so that i could get more money back (f*cked up isn't it?). i didn't do my taxes for dancing because 1.i didn't know that you could do that, 2. i had another job and i figure i could just use that, and 3. i didn't want my parents to know since i was still living with them. i moved out in the summer of '04. when tax season of '05 came along, i didn't do that either. i was told that as a independent contractor, i could be given two years off of doing my taxes so that i can get my business together. i wasn't sure about that so i didn't bother doing it since i was f*cking naive as hell. Now this tax season is coming around and i know for a fact that i have to do it. i'm asking for advices now so that i can have money saved up to pay the irs when it comes along. i've kept the majority of my reciepts dating back to '04 and i went to the bank to get all statements back from '04 too. one of the girls at work told me that she didn't start doing her taxes til her third year of dancing so that made me feel just a lil (a very very lil) better. now what do i do??

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    Banned Melonie's Avatar
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    Default Re: How much trouble am i in?

    there are tons of older threads here covering many of the questions you are asking. A good place to start might be ...

    The literal answer to your question "How much trouble am I in" is ... none - yet - probably ! The 'probably' assumes that your bank balance hasn't exceeded a few thousand dollars, and further assumes that you haven't bought anything expensive which requires a registration i.e. a car or house, and further assumes that you, your club, or other dancers at your club haven't been involved in anything which would provoke major IRS attention. The 'probably' is even less of a factor because according to your post you did file a tax return in past years for income from your 'straight job', such that a cursory check by the IRS would show that you have in fact reported 'some' income to explain where your bank balance came from.

    The literal response to "i was told that as a independent contractor, i could be given two years off of doing my taxes so that i can get my business together" is ... absolute bullshit. From an IRS code standpoint, everybody earning money in America is required to file and pay taxes the minute their earnings exceed $700 in one year. Since you also had a 'straight job' which surely provided you $700 in earnings, by the letter of the law every single dollar of dancing income should have been reported.

    Your situation is a bit more complicated than if you had only worked as a dancer and had simply not filed or paid taxes. From your post it would appear that you did in fact file a tax return, and you did in fact report X amount of income from your 'straight job', and you did in fact choose not to also include your dancing earnings in your reported income. This means that if you want to go back now and report 2004 and 2005 dancing earnings, it will be necessary to file amended 2004 & 2005 tax returns and necessary to pay additional 2004 and 2005 income tax plus penalties for late payment. But filing an amended tax return can, in and of itself, raise IRS eyebrows, particularly if the amount of the change in reported income is quite large, and even more particularly if more than one year's declared income is amended.

    I hesitate to comment much further along these lines for obvious reasons, and would defer to other posters with more accurate IRS & tax knowledge regarding your situation.
    ~
    Last edited by Melonie; 10-18-2005 at 08:10 PM.

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    Default Re: How much trouble am i in?

    the most i've ever deposited into my acct is two grand. i looked over all my deposits from my statements from '04 and it added up to about sixteen grand. 05 might be about eighteen from jan to now. in jan '04, i purchased my car with two gs down and i have about four gs left to paid off. thank you so much for answering my thread.

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    Default Re: How much trouble am i in?

    ^ This idea that only depositing enough to look like you're making money, but just not enough will not save you. If you are depositing $16,000 into your accounts, but are living as a single person (meaning completely on your own) and living a lifestyle that would require to make $40,000 a year, then you will be shocked to find an IRS agent standing outside your door with a big, fat, hefty bill with back taxes and penalties. Unless you are living with someone who makes a lot of money...and the majority of the bills/etc are in their name...YOU are the liable one...and the one that the IRS will look at and say, "There's no way that you can afford this apartment (or mortgage payment...which is even worse), car, credit card, jewelry, new clothes, nice furniture, and vacation all on $16,000."

    I've not known too many people who "claim" $16,000 a year and actually LIVE like they make that much. They're always living up to their means...and even if they are not spending the money...it's packed away in savings or a safety deposit box...which the IRS does have "look-see" access to.

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    Default Re: How much trouble am i in?

    As Venus implies, the IRS now has the capability of consolidating information it receives on the 'expenditure' side ... new car registrations for one ... and comparing that information to the amount of income the same person declared on their tax return, less typical costs of living in the zip code where the person lives. In the 'good ol days', if the IRS did not receive W2 or 1099 income reports it had no way of 'closing the loop' with expenditure data short of dispatching an army of human agents (which it reserved for big targets like mob bosses). But today, the fact that the IRS didn't receive automatic income reports is no guarantee that the IRS can't reconstruct a probable income level based on bank account interest statements, car and home title registrations, brokerage account statements, and a host of other automatic reporting mechanisms. Thus if a person is reporting and paying taxes on $20k in annual income, but that same person has registered a $20k car, IRS eyebrows will go up. A few inquiries regarding the same person's bank statements, credit card statements, loans etc. can quickly provide proof that the same person is in fact handling a lot more money than they reported earning in the first place.

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    Featured Member Lizette's Avatar
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    Default Re: How much trouble am i in?

    Quote Originally Posted by VenusGoddess
    a safety deposit box...which the IRS does have "look-see" access to.
    Really?

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    Default Re: How much trouble am i in?

    A couple of quick comments -

    Under audit, and IRS agent might inquire if you have a safe deposit box. You are advised to not lie - they then can inquire what you have in it (important papers, etc.) and they will ask if you have cash in it (again don't lie) and there is nothing illegal about keeping cash, gold, metals, valuables in a safe deposit box.

    You should amend your tax returns correcting your income. You will have interest but you should avoid penalties.

    Get a post office box and use that address for filing. This will keep your stuff away from friends, family, and snoopers.

    The people that said you have a 2 year repreive from filing taxes were clearly mistaken. However you don't have to follow their advice and you have the opportunity to correct your inadvertant oversight.

    Although amended returns are reviewed, I have only very rarely seen an amended tax return lead to an audit. I am sure it has happened, but in over 20 years of providing tax services I simply haven't had it happen to my clients and I have amended 100's of returns.

    If I can be of further assistance, feel free to contact me.

    Kindest regards,

    Dan Morris
    Daniel D. Morris, CPA
    [email protected]

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