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Thread: Tax Questions - Deduction Thread?

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    Lightbulb Tax Questions - Deduction Thread?

    I am doing the taxes of a friend of mine who works as an exotic dancer and I had a few questions that I am sure some of you who are doing your own taxes are also wondering about.....

    She did not receive a W2 but received a form 1099-Misc (Miscellaneous Income) which reported her earnings as "nonemployee compensation". I believe this is an attempt by the club to estimate her earnings. Have any of you gotten such a form? She works for Deja Vu if that matters....

    She works at a club that requires her to pay a fee at the start of her shift called a "payout". I assume this fee is deductible from her reported income. How do you report this payout on your taxes? I guess it can be listed as a business expense under the category "Payout" (maybe with an explanation of what it is) unless anyone has a better idea.....

    I also assume other expenses related to stripping like makeup, shoes and cloths are also deductible...

    I was thinking it might be a helpful service to list what deductions dancers take on their taxes so we can "pool" resources and ideas in this thread? I think this could benefit ALL the dancers and I don't see any down side of everyone sharing their favorite deductions (unless you want to keep yours secret for some reason).....


    Thanks in advance for your input!

    -Mark

    P.S. Not that it matters but I am doing this as a favor for my friend who is also a single mother. I am not romantically involved with her but I do like her as a friend and though I would like to see her in a different profession, I respect her choices and am not judgemental.....

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    Default Re: Tax Questions - Deduction Thread?

    Quote Originally Posted by mark069 View Post
    I am doing the taxes of a friend of mine who works as an exotic dancer and I had a few questions that I am sure some of you who are doing your own taxes are also wondering about.....

    She did not receive a W2 but received a form 1099-Misc (Miscellaneous Income) which reported her earnings as "nonemployee compensation". I believe this is an attempt by the club to estimate her earnings. Have any of you gotten such a form? She works for Deja Vu if that matters....

    She works at a club that requires her to pay a fee at the start of her shift called a "payout". I assume this fee is deductible from her reported income. How do you report this payout on your taxes? I guess it can be listed as a business expense under the category "Payout" (maybe with an explanation of what it is) unless anyone has a better idea.....

    I also assume other expenses related to stripping like makeup, shoes and cloths are also deductible...

    I was thinking it might be a helpful service to list what deductions dancers take on their taxes so we can "pool" resources and ideas in this thread? I think this could benefit ALL the dancers and I don't see any down side of everyone sharing their favorite deductions (unless you want to keep yours secret for some reason).....


    Thanks in advance for your input!

    -Mark
    There are ENDLESS number of posts on this site about what deductions dancers can take. Do a search.

    In short, she can deduct anything that she uses for work. If it's tanning, nails, hair that she's wanting to deduct, she should probably only deduct 50% of that because she may do those things because she's a dancer, but she would probably be doing that if she wasn't...so 50% should suffice as a deduction. You cannot deduct the Payout/house fees. It sucks, but unless you had "proof" of these payouts, there is no way that that will fly. Tipouts, etc...all fall under the same category. The only way she could do that would be 1099 the club and the others that she's paying out of her earnings.

    The 1099 she received is because she is an independant contractor with the club. Most likely the "estimate" on her earnings are just on whatever credit card receipts her customers ran on her (for VIP room etc). But, this should not be an issue because she should have been keeping track of exactly how much money she was bringing home. If she doesn't know how much she's bringing home, then a look at all of the deposits on her bank statements should tell you.

    Don't forget to only deduct the stuff she has receipts for. The IRS will most likely be looking at dancer tax returns a little more closely this year. Better to play it safe than not.

    P.S. Not that it matters but I am doing this as a favor for my friend who is also a single mother. I am not romantically involved with her but I do like her as a friend and though I would like to see her in a different profession, I respect her choices and am not judgemental.....
    You're right...this doesn't matter, but you just made yourself sound like a total judgemental asshole, even if you are trying to make it seem like you're not. I also sounds like you have a "thing" for this woman. So what?

    Anyways, if you want more info, do a search.

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    Default Re: Tax Questions - Deduction Thread?

    several very general comments ...

    The 1099-misc income reported by clubs is usually only that fraction of the dancer's earnings that are attributable to customer spending via credit card (which create a paper trail for the clubs). This figure does not include cash earnings - a fact which the IRS is completely aware.

    Stage fees / booking fees / 'payouts' ARE a legitimate business expense tax deduction if they are charged by and paid to the club.

    Other fees such as tipouts to bartenders / bouncers / waitresses are a legitimate business expense tax deduction if one of the following is true. A) these persons must be actual employees of the club not independent contractors. B) if these persons are independent contractors, your client must issue 1099-misc forms of her own to these persons for the amounts she paid them in order to claim a legitimate business expense tax deduction. If these persons are independent contractors, in the absence of issuing a 1099-misc to each of them, her payments are legally considered to be a non-deductible 'gift' rather than a business expense.

    As far as makeup, costumes, shoes etc. in general the 'housewife test' must be applied. Thus theatrical makeup is deductible while WalMart makeup is not, costumes which cannot be worn in public are deductible while bikinis are not etc.

    As Venus already pointed out, if you use the SEARCH function with keywords deductible, deduction, IRS etc. a wealth of past threads will come up.

    Also, the US congress recently approved an additional expenditure authorization for the express purpose of funding a new IRS enforcement division targeted towards adult businesses. Thus it is highly probable that tax returns listing any job code that corresponds with an adult business, and/or tax returns reporting W2 or 1099 income from known adult businesses (like DejaVu / Hustler corporation) will receive an unprecedented amount of scrutiny this year.

    PS don't forget to calculate any underpayment of estimated taxes penalty correctly.

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    Default Re: Tax Questions - Deduction Thread?

    I always deducted my housefees. Its a legit business expense. The clubs, most clubs will give you a receipt for payment with your "dancerID" which is tracked to your personal info.

    Also, tips to DJ, etc, don't count, but if its cash and she doesn't count it towards her gross earnings....I'm just saying, depends on how much you are tipping out per year. If she works for a Vu she's probably being charged out the yinyang.

    Also, dude, you don't really seem to have a clue about what you are doing. Have you prepared taxes for a sole proprietor before? What qualifies you to help her? Perhaps she should sign up on SW and search the threads herself.

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    Default Re: Tax Questions - Deduction Thread?

    Quote Originally Posted by Katrine View Post
    I always deducted my housefees. Its a legit business expense. The clubs, most clubs will give you a receipt for payment with your "dancerID" which is tracked to your personal info.

    Also, tips to DJ, etc, don't count, but if its cash and she doesn't count it towards her gross earnings....I'm just saying, depends on how much you are tipping out per year. If she works for a Vu she's probably being charged out the yinyang.

    Also, dude, you don't really seem to have a clue about what you are doing. Have you prepared taxes for a sole proprietor before? What qualifies you to help her? Perhaps she should sign up on SW and search the threads herself.
    Thanks for the info. I have filed taxes as an independent contractor when I was a consultant a few years ago but I am no expert. She asked me to do her taxes thinking it would be relatively simple and straightforword but I am also beginning to come to the conclusion that she might be better off with a professional.

    I believe she would prefer to stay away from an accountant because she has kept terrible records but without these records my confidence in the numbers she is giving me is really low. I am going to strongly encourage her to get an accountant because I am concerned about her getting an audit and then myself being in the middle of it.....

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    Default Re: Tax Questions - Deduction Thread?

    Quote Originally Posted by Katrine View Post
    I always deducted my housefees. Its a legit business expense. The clubs, most clubs will give you a receipt for payment with your "dancerID" which is tracked to your personal info.
    Hmmmm...at my old club, we NEVER got anything like that. That would have been nice to have, though...nice big deduction I couldn't take without that proof.

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    Default Re: Tax Questions - Deduction Thread?

    Quote Originally Posted by VenusGoddess View Post
    Hmmmm...at my old club, we NEVER got anything like that. That would have been nice to have, though...nice big deduction I couldn't take without that proof.
    Whoa, that sucks!! I bet they didn't report that income all you dancers gave them either then! Bastards! I always made them give me a receipt for housefees, at every single club I've ever worked. I just looked at one of my old returns. $x,xxx deducted from housefees. And I've worked in low-fees cities, FYI. Now, I may have lost a few receipts while throwing out customer business cards () but if she can backtrack to the days she worked, and the fees for that shift, she can re-create the spreadsheet.

    Mark, I'm sorry to be rude to you. I know you are trying to help. I can be an asshole. Can you both get access to her bank statements for the last year? That might be helpful.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

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    Default Re: Tax Questions - Deduction Thread?

    I read through everything and there was some great advice there for you.

    A couple of things I would like to share from my perspective - remember to always work within your own comfort zone.

    1. "As far as makeup, costumes, shoes etc. in general the 'housewife test' must be applied. Thus theatrical makeup is deductible while WalMart makeup is not, costumes which cannot be worn in public are deductible while bikinis are not etc."

    Yes, great advice as it is good to err on the side of caution. If you do want to take some of your other expenses such as over-the-counter makeup, I would take a percentage of it depending on how many hours are worked. If someone is only working part-time, I would take a lesser percentage than full-time. Of course for those that have mixed businesses, figure all of them together. I'm with you 100% in regard to the costumes and bikinis.

    2. As for expenses - my rule is that if you don't have a receipt, bank statement, credit card statement, online account or confirmation e-mail that can be used as supporting documents, then do not use the expense.

    3. Melonie brings up an important point about tips - like others that are known to receive a fair amount of tips, the gov't will be expecting to see a gross income amount larger than the 1099 amount - I wouldn't disappoint them.

    4. " I believe she would prefer to stay away from an accountant because she has kept terrible records" That's like staying away from a doctor because you have not taken care of your health and feel miserable. The only thing to do in a situation like that is to comply to the laws, cut your losses and make sure to keep accurate records for the current year. Sounds tough, I know, but you don't want to mess with the IRS.

    You'd be a good friend to find her someone that can help her get straightened out. Preferably someone that can help get her organized throughout the year. Does her club have an in-house accountant? She might want to ask the other dancers where they go.


    Ok, everything else has been said. Good luck to you and your friend. May she end up in good standing!
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    member/ advocate
    . My purpose is to keep you in compliance with the law, but to use the law to your advantage.





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    Default Re: Tax Questions - Deduction Thread?

    Again, we are all offering advice that is mostly based on 'school of hard knocks' feedback from dancer audits of years past. Unfortunately, with this new IRS adult business enforcement focus, there is no guarantee that deductions that have 'flown' in the past despite a clear basis in the IRS tax code will continue to 'fly' in the future. Here I'm talking about deducting a percentage of dep't store makeup, deducting a percentage of tanning sessions, deducting a percentage of health club memberships - that sort of thing.

    I am NOT looking forward to the 'fallout' resulting from the IRS beefing up it's adult business tax enforcement unit. The two previous areas of targeted IRS enforcement were casino workers and cab drivers, and both took some serious 'hits' - both in terms of audits and, more importantly, in terms of structural changes in the way their 'cash' earnings are now accounted for and reported to the IRS.

    The IRS tax code actually contradicts itself because, on the one hand, it generally allows legitimate deductions for expenses which are 'ordinary and necessary' for the conduct of your business. In theory, this would allow for 100% deduction of the costs of hair salons, tanning, health clubs etc. as no dancer can be successful if she doesn't look good ! On the other hand, all of these fail the 'housewife test', another IRS doctrine that says things that a housewife would spend money on without any business purpose in mind must be for personal benefit thus are not legitimate deductions for business expenses.


    I'm going to toss out one more general comment. It's no huge secret that, in past years, some dancers have chosen to 'smurf' their way around the IRS. I suppose this is understandable, given that many girls who first start dancing don't realize their independent contractor tax obligations in terms of making estimated tax payments quarterly, plus the fact that between self-employment tax and income tax that some 25-40% of their net incomes are in fact owed as taxes. This puts many girls in the position where April 15th is fast approaching, they haven't made estimated tax payments throughout the previous year, they have their taxes done, and their accountant tells them that they owe $10k-$20k or more to the IRS - money they have already spent and simply don't have available to pay the IRS. In the past this has provided an incentive for some girls to simply 'forget' to file a tax return ... which in the absence of a W2 or 1099 report from the club had a pretty high probability of 'slipping under the radar' of the IRS in past years.

    However, with the IRS increasing automatic reporting on the earnings side via 1099's, and with the IRS increasing automatic reporting on the expenditure side (i.e. the purchase of a house/condo/car or anything else that requires a title/deed registration, the reporting of bank / investment / retirement earnings by financial institutions, the reporting of any 'cash' transaction over $10k fed $3k most states) the continued ability for dancers to 'slip below the radar' of the IRS is rapidly fading. And where a high profile corporate club 'employer' is concerned, particularly a corporate club that has issued a 1099 in the dancer's name, there is now NO chance that IRS alarm bells won't start ringing when their computers are unable to match up that 1099 income report with a tax return from the same person declaring and paying taxes on that income. In point of fact, since the IRS is fully aware that the income reported via a club 1099 does not include cash earnings, the IRS is going to expect to see that same person declaring and paying taxes on an amount of income that is significantly greater than the 1099 amount !

    Mark, the reason that I am rehashing these points is to try and provide a glimpse of the possible IRS scenario that you might be flirting with - and particularly so if this girl's past years' tax picture is just as bad as this year's situation. If and when the IRS decides to take an interest in this girl's tax return, at minimum they are going to look back three years. If by some amazing coincidence this girl has been successfully 'smurfing' her way under the IRS radar all that time, but now the new IRS adult business enforcement unit decides to take a closer look at her past and present tax obligations, the ultimate tax bill plus penalties and interest could be inundating.

    ~
    Last edited by Melonie; 03-14-2007 at 02:01 AM.

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