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Thread: An interesting tax idea, hypothetically, of course!

  1. #1
    Lola Rose
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    An interesting tax idea, hypothetically, of course!

    Bartenders and wait staff are not independant contractors, right? But they are tipped employees.....

    So, dancers, as independant contractors, pay about double the amount of taxes, to my understanding....

    But, what if a dancer bartended 2-3 times a week, and then danced 1-3x a week. Could she count what she made dancing as bartending tips, and therefore pay a lesser amount of taxes on the money?

    I DO NOT want to hear a lecture on the legality of this, it's all hypothetical

  2. #2
    God/dess Emily's Avatar
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    Default Re: An interesting tax idea, hypothetically, of course!

    Your taxes aren't double as an IC. They are only a little higher (provided they make the same, of course.)

    They only appear much higher because you don't have an employer withholding for you. Also, you won't be able to write off as much.

    Seems high risk, little reward.

  3. #3
    Lola Rose
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    Default Re: An interesting tax idea, hypothetically, of course!

    hmm. so does a bartender pay out the same as a dancer in taxes?

    I think you're saying yes, but I just want to verify

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    Default Re: An interesting tax idea, hypothetically, of course!

    it depends on what you're writing off as an IC

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    Featured Member sunnie's Avatar
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    Default Re: An interesting tax idea, hypothetically, of course!

    Well the bartender is getting paid at least $2.15 an hour...so that goes towards taxes. As a result, their checks are usually void and they have to pay the remainder in April.

    The sucky part is, depending on where you work, the establishment will usually claim for you 12 to 15% of your sales as tips. Obviously you usually make more like 20%, but 12% is the norm for IRS purposes. If you get big cc tips, all of that gets claimed.

    We have it better, I think.

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    Banned Melonie's Avatar
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    Default Re: An interesting tax idea, hypothetically, of course!

    In theory, the only difference in tax rates paid by an independent contractor but not by an employee is that an independent contractor must pay the 15.3% self-employment tax rate for social security and medicare, whereas an employee pays a 7.65% tax rate for social security and medicare that is matched by another 7.65% being paid by her employer. This is technically not an 'income tax' but a social security / medicare system tax, but it is in fact calculated as a percentage of gross income.

    As far as actual income taxes, in theory both independent contractors and employees pay the same income tax rates. However, independent contractors are allowed to take more business expense deductions against the amount of actual income that the tax is calculated on than employees are. Also, the way federal and state income tax tables are written, independent contractors or employees don't actually start paying much in the way of income taxes until their incomes exceed $25-30k a year or so.

    Independent contractors are also allowed to 'deduct' 1/2 of their social security / medicare self-employment tax (i.e. the employer's share) as a legitimate business expense (technically speaking, it's a downward adjustment to gross income before income taxes are calculated).

    ~
    Last edited by Melonie; 03-03-2007 at 06:19 AM.

  7. #7
    Lola Rose
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    Default Re: An interesting tax idea, hypothetically, of course!

    Ok, thanks! What with deductions, that makes a lot of sense that it's better to claim as a IC.

    If I did start bartending some, would I have to file yearly taxes for that, and still do quarterly for my IC dancing job, or could I file together somehow.

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    God/dess Emily's Avatar
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    Default Re: An interesting tax idea, hypothetically, of course!

    you have to send quarterly estimated taxes for your dancing income or you will be hit with penalties and interest on April 15th.

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    Banned Melonie's Avatar
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    Default Re: An interesting tax idea, hypothetically, of course!

    ^^^ yes, that is the supposed downside of an independent contractor businessperson 'being your own employer' ... you also have to fulfill the employer's role of withholding estimated tax payments from yourself and sending them in to the IRS and state tax authority. However, unlike formal employers who must do this every pay period (weekly, bi-weekly, however often they issue paychecks), independent contractors only have to do this once every three months.

    And yes of course you can file a tax return that includes both hourly 'employee' earnings as well as independent contractor business income. The hourly 'employee' earnings get entered as 'wages' on your 1040 form, and your 'independent contractor' earnings get entered as 'business receipts' on Schedule C.

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    Default Re: An interesting tax idea, hypothetically, of course!

    Quote Originally Posted by Lola Rose View Post
    hmm. so does a bartender pay out the same as a dancer in taxes?

    I think you're saying yes, but I just want to verify
    If the bartender makes the same money, basically, yes. EVERYONE pays social security and medicare - that is what our "self-employment tax" is: the social security and medicare that is normally withheld from employee paychecks. Granted, employers pay a portion of SOME taxes for employees, but we should be writing off enough as ICs to make up for that small difference! Our health insurance payments, for example, are tax deductible so there is no reason for us not to have insurance!

    The notion that self-employed people pay extra tax is ultimately a fallacy (provided you are doing your stuff right).

    Quote Originally Posted by pheno View Post
    When you lead a nontraditional life don't try to measure it with traditional milestones.

  11. #11
    Lola Rose
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    Default Re: An interesting tax idea, hypothetically, of course!

    You ladies are awesomely helpful

    Thanks! a ton

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