Happy Sunday Ladies and Gents!
A delicate issue has come up for me, many of you I'm sure have figured this out, but I just not sure how to handle as I am new to this. This is my first year touring every month and hitting major cities and also of course lots of lodging and transportation costs. How do you deal with the IRS on this? Do you claim these expenses at all or do you just eat it . . .you can just pm me if you like. I would prefer that. I have a tax attorney who understands the business who is very good and he says I can claim lodging or travels as traveling model or just eat the cost of travel . . would love any feedback or advice as to how to go about this, or what has been your experience? Thanks so much . . I look forward to hearing from you! xoxoAdriana~
-- Modified on 3/16/2014 12:04:56 PM
then go ahead and do so. It's his business to know.
On the other hand, I seem to recall someone on here not long ago saying that you can not deduct the costs of illegal activity against the income from that illegal activity. But if you describe your occupation as an escort (Which is legal.), then maybe that rule doesn't matter, at least until you get arrested. I'd trust something my attorney tells me before anything I read on this board, in any case. (still not a lawyerUnless you just misquoted him? Take it or don't? Nah...that's a lawyer for you LOL
I would strongly recommend finding a CPA who is hobby friendly to assist you in preparing your Schedule C income and expense schedule. There's a plethora of deductions that you can and should deduct against your income. As well (s)he should assist you in reconciling your accounts so that in the event of audit you have a complete listing of how you arrived at the net taxable income. Feel free to PM me if you want more specifics. There are other tax professionals on TER that are also well versed in this area.A delicate issue has come up for me, many of you I'm sure have figured this out, but I just not sure how to handle as I am new to this.
This is my first year touring every month and hitting major cities and also of course lots of lodging and transportation costs. How do you deal with the IRS on this? Do you claim these expenses at all or do you just eat it . . .you can just pm me if you like. I would prefer that.
I have a tax attorney who understands the business who is very good and he says I can claim lodging or travels as traveling model or just eat the cost of travel . . would love any feedback or advice as to how to go about this, or what has been your experience?
Thanks so much . . I look forward to hearing from you!
xoxo
Adriana~ -- Modified on 3/16/2014 12:04:56 PM
There are several issues.
1. The expenses have to qualify under tax laws as interpreted by the IRS. The rules concerning business expenses are subject to interpretation and as Chicago CPA mentioned can be looked at as being related or not related. So I would use a very strict interpretation in deciding what expenses you could use.
2. You need to have proof of expenses. Credit card receipts, hotel bills, etc. Receipts for anything you paid for in cash. 3. You will need some proof of business during the time that you travel. They might assume that some of the travel is for personal use and you are trying to write it off as business. If you tell them you are a traveling entertainer (wink, wink), they will figure out your line of work, but will not turn you in. I think it would be simpler to just your report your net income. Example 1: You report $100,000 gross income and report $40,000 of expenses. Claiming a net of $60,000. Example 2: You report $68,000 of gross income and $8,000 of expenses.
Either way you are reporting $60,000 taxable income. Your taxes are the same. A business with no claimed expenses can look suspicious as well as a business with very high expenses. In my mind, this is a safer way to go to lessen you chances of an audit. If you really want to get into it you read Publication 334 (2013), Tax Guide for Small Business
-- Modified on 3/16/2014 5:46:13 PM
hat you incur as a part of an illegal prostitution business. Only Mr. Fisher got it right.
Illegal income is, of course, subject to federal taxation. So your ill gotten gains are taxable. But any attorney who advises you lodging and transportation costs can be deducted as ordinary and necessary expenses to your prostitution business needs to retake Baby Tax, as we call it.
imagine this lady completely misunderstood what the tax attorney told her or whether he truly understood she is engaging in an illegal business.
Come on, CPA, you know that “plethora of deductions” she “can and should take” only works if she does not get caught. If she gets caught, her peril ranges from disallowance of the deduction, payment of penalty and interest on her true income, to possible indictment for tax fraud. The answer is – just don’t do it to save a few bucks. Tomorrow we will discuss how many crimes a CPA commits when he knowingly advises a prostitute to file a false return. Maybe you should flip flop on this one LOLYour best bet is to form a business as a Consultant. A Consultant can mean many things. You may deduct travel expenses and hotel as such. Always keep good record.
Actually, escorting is an established business. Whether you're fucking your clients is not material to the iRS. You have legitimate business expenses? Report them. Food and lodging are a common deduction so by all means report them. I would make sure you keep complete records i.e receipts for all expenses.
As for the consultant idea? You're not a consultant so why lie to the IRS? The lying--in most cases--is a larger issue than the actual crime. Ask Martha Stewart.I agree with the premise of getting a business formed (LLC might be ideal for you) and try to create something that reflects your real interests, education and background. It also makes a great cover for those in your life wondering why you are on the road. And it sounds like you have someone giving you advice so you are headed in the right direction already. In my humble opinion, I've always been a believer in pay your taxes and then some. As much as I hate it, this is not an area I believe in being cheap because to pay for a lawyer and your accountant in an audit will cost you in stress and funds. I think it is a blessing to be able to do this, especially when many people are financially challenged. I conservatively use real expenses that I think won't raise any red flags and I eat the other expenses. And I straight up pay my taxes on the income earned. You just don't want to screw with the IRS.