Being caught and charged with prostitution is minimal compared with the penalties of not paying taxes on income.  At the very least you will be hit with hefty fines and interest...at worst you could be jailed.  Remember that Al Capone was busted for tax evasion.

I know that I have in the past had retail liscenses and done web design for neighbors

She could always get a cosmotolgy liscense and then she doesn't have to worry about paperwork as most are walkins or be an image consultant.

Yes - From the the Reluctant Tax Adviser

Yes, as a non-incorporated business person, she is deemed a sole proprietor for tax purposes and should report her income on a 1040 Schedule C.

It is a paradox (as one other person mentioned - Al Capone) the failure to report and pay taxes on income, even if is a derived from an illegal source, is illegal.

That said, along with reporting the income she also would have a number possible expenses.

1) Auto expenses using the standard mileage or actual expenses method. Usually newer cars yield greater expenses.
2) Possibly could deduct expenses for office in home.
3) I would say lotions and condoms and those types of "office supplies" would be appropriate.
4) Telephone usage and computer equipment for office needs.
5) Cost of advertising and website development and maintenance etc.
6) Hotel bills and other incall expenses
7) Child care (reported on a different form)

The list of possibilities goes on but once again without knowing the particulars of her situation, it is hard to advise.

I have included URL's to the IRS 1040 Schedule C and its instruction. This is the form on which most self-employment income and the related expenses are reported. The form in particular lists a variety of expenses to consider.

http://www.irs.gov/pub/irs-pdf/f1040sc.pdf
http://www.irs.gov/pub/irs-pdf/i1040sc.pdf

Good Luck,

OFF

-- Modified on 6/17/2006 3:23:11 PM

I have been declaring (*and paying taxes*) on donations that have been left for me through my consulting for three years now.

In addition to providing the necessary legal papers to document the extra income I have, it also justifies my business license (which is also a ticketed violation in my City and state if I do not possess one)

As a small business owner, I pay the same taxes as any other small business owner.... I just have deductions that are a bit unusual.

I would encourage all providers to declare income and to pay the taxes associated with this income..... then, the provider will have one less worry.