If a provider reports her income to the IRS can she then deduct expenses such as hotels, condoms and advertising?  

Or, is this not allowed as the underlying income is presumed to be from an illegal activity? That lawyer with 80K in escort deductions got me thinking...

Why the alias?

It depends on how she classifies her income. If escorting is legal where she lives and she has the proper state licensing, then hotel and advertising expenses would be deductible, as would the cost of the license. I guess condoms could be listed under "consumables," but if the receipt says "condom," not sure if it would stand up to an audit.

Thanks!

all income is taxable whether legal or not.

The rules for allowable deductions would be the normal rules that apply to all self-employed individuals.

So travel, misc expenses, advertising would be allowed.
You can take the expenses without good records but the IRS would throw out all these deductions in an audit if you could not back them up with written records.
Normal clothing is not deductible. But if you had a special uniform like a naughty nurse then they might accept it.

Would I'd rather deny a deduction of $300 for condoms, or face a dependent deduction for $2,000 (?)

Something to think about.

By the way, it bears mentioning:

Pay your taxes.  Deduct all that your accountant deems proper, the worst case is that they will deny it.

If you are busted for soliciting, it's a minor misdemeanor.  If you are busted for tax evasion, it's a felony.

(still not a lawyer)

Most people who owe taxes do not face any criminal penalties.
There are $ penalties for not filing if you owe and a 20% penalty for underpayment of taxes if you do something that understates your income. But it is fairly rare that the IRS refers a case to the justice dept for criminal prosecution.

You can't 1099 her...

But she should claim her income. There are quite alot of threads here on this topic...

xxx
Jinni

but I wouldn't deduct c0ndoms, lvbe or "toys"...

Those are non taxxx deductible exxxpenses(necessities of life, eh?)..heheheh

xxx
Jinni

For a woman who did naughty lingerie and sex toy parties.

She had a two page list of items that she bought for demonstrations.
I let her deduct the cost of batteries.

Was getting my user id straightened out - long story.

Thanks for all the great answers!