What Will the IRS Find If They Google You?

March 11, 2014 at 5:30 pm (Adult Industry, Business, Business Taxes)

The Internet is a wondrous world where people may become anyone with any lifestyle that they desire. People create alter egos for a plethora of reasons. Some do it to exercise other personalities within themselves, researchers and writers do it to learn more about a particular group or culture for their work and others do it to speak their thoughts without the fear of recourse. Of course there are also those that do it to deceive and thieve. In this great web of information, some is true and some is not. Anyone can say anything about themselves or others be it true or false.

We all know that the IRS will go to great lengths to find in depth information about taxpayers’ modes of income and lifestyle including “Googling” their websites and blogs. However, it has come to my attention that they are delving further into taxpayers’ online life than suspected. They are hunting to uncover other possible identities and lifestyle via message boards, social media and individual postings. To some that may not be much of a surprise, but it may come as a surprise that the IRS is also taking to subpoena companies to answer questions about your membership. Regardless of the intent or context, some IRS agents are willing to use taxpayers’ own words and the words of others against them in an audit, be those words true or not.

Many might think, “Well, if you aren’t doing anything wrong, then why worry?”. There is much cause to worry as many people share the same name or pseudo name in real-time and online life. Identity mix-ups happen all the time and now with ease of the Internet and ID theft, the danger of being misidentified is higher than ever. You must protect yourself and one way to do that is to be truthful when preparing your tax return or when having it prepared.

I am a tax preparer who believes that client transparency is the key to a water-tight and legal tax return while also helping to legitimize the Adult Industry. I advise those clients with non-legal income to separate it out, report it and handle it appropriately within the tax law. Know that you and you alone own your tax return and will be held responsible for any and all information on it. Be truthful and keep excellent notes for each tax year in your records.

It is good practice for any business to have a business plan. I advise that if you own a business, that you at least write a detailed description of what your business is, what it offers and doesn’t offer and how it is run. It doesn’t hurt to also have a mission statement as well. Make certain that all of your online and real-time actions clearly and closely represent this description and mission statement.  Keep a copy with your tax documents as it may be crucial to your case in the event of an audit. In this way you will have written it when you are relaxed and eloquent and not when you are under audit, scared and stressed. It is also important to “Google” yourself regularly to keep a close eye on what is out there about you.

In an IRS audit it really is a “crap shoot” whether or not you are assigned a fair agent. With that in mind, do you really want to gamble with your personal and tax information as well?

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The “Appearance & Image” Issue Demystified

March 4, 2013 at 11:16 am (Adult Industry, Business, Uncategorized)

Since I announced the IRS’ new, specific wording last Summer about “Appearance & Image”, I have been inundated with questions and pleas about the issue. I understand your frustration and anger as I know how much those of you in both the Vanilla and Adult entertainment invest in your businesses. Even though we both know that these are, in IRS terms, “ordinary and necessary” business expenses, the IRS has put specific limits in specific wording on what can be taken as a deduction.

Firstly, please let me say that we tax professionals can only interpret the tax laws and follow them as we interpret them. However, when wording is specific, there is no magic power that we hold that can change it. We are not trying to be mean, but instead taking our clients’ best interest into consideration. Knowingly taking non-allowed deductions is considered fraud, therefore a tax professional who cares for their client at all will not lead them into these shark-infested waters.

I am going to share with you a few exerpts (below) from the IRS MSSP (Market Segment Specialization Program) – 1040 Tax Issues – Entertainment.

This guide is what the IRS auditors are given to assess the entertainers who they are auditing. The guide is “designed to provide assistance in auditing individuals in various aspects of the entertainment industry.”

Make-up
Make-up for performances is usually provided by the studio. Stage make-up that the
taxpayer buys for an audition or a live theatrical performance may be deductible, if it is
not a general over-the-counter product.

Wardrobe
To deduct clothes as a business expense, two requirements must be met. First, the
clothes must be required by the employer. Second, clothes must not be adaptable to
street or general use.

Expenses for costumes and “period” clothing are generally deductible. However, most
union contracts provide for compensation to be given performers who require special
wear. The taxpayer must prove that his or her contract did not include such
reimbursement for the expense to be allowable.

Physical Fitness
Deductions for general physical fitness are not allowable. Usually, if physical fitness is
required of a specific job, the studio will provide the cost. If the taxpayer was
employed in a capacity that required physical conditioning, allow expenses for the
duration of employment if no reimbursement or compensation was available.

What are solutions to this dilemma you can take right now? Well, buy stage makeup from a theatrical supply store and make certain that your costumes are indeed clothing that would not be worn in public, regardless if you would personally wear them or not.

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The new 1099-K form FAQs

February 16, 2012 at 6:07 pm (Adult Industry, Business Taxes, General Tax Information)

What are the new 1099-K forms and how are they different from the 1099-Misc that I get?

1099-K = Gross amount of income from credit card transactions when using a payment platform (Niteflirt, Keen etc). You deduct the fees on your tax return.

1099-Misc = Net amount of what you were actually paid by the company itself (Papillon, 121 etc.). If this is wrong, you need to take it up with your company. If they won’t help you, you can always deduct those fees from your income on your tax return. It is better that you report what the 1099 says than to under report it as that creates a ‘red flag’ with the IRS.

Why does the amount on the form include the fees etc. that I paid already?

Companies are required to file the gross amount of payments that a contractor received (income that includes all fees that were taken out before payment). This is the amount that includes the fees, bids etc. that is withdrawn before a payment is made to the contractor.

How do I deal with this form on my tax return?

You report the gross amount exactly as it is stated on your 1099-K form. If you have kept accurate records of your income and expenses, it will be easy to pull out the fees, bids or any other amount that you have already paid before you received each check from the processing company. These amounts are deducted on your tax return just like any other expense.

I’m not sure what that means. IRS Won’t Require Reconciling 1099-K Reports on Credit Card Payments with Gross Receipts  Tax Domme, does this mean no more 1099-K or a change to how earnings are reported on the 1099-K?

To ‘reconcile’ in accounting means to balance payments and earnings. You reconcile your checkbook at the end of the month to match the checks that you’ve written, deposits made and other transactions with what your bank statement says to make sure that they balance. Same thing here. The IRS is saying that taxpayers do not need to show their records to match the gross earnings (gross means all income without taking out fees and expenses paid) reported on the 1099-K. This means that you need to accept what the 1099-K states, report that amount on your tax return and then deduct any amount that pertains to fees etc. from that income on your tax return.

It is still a good idea to keep accurate records though regardless of what the IRS says. In the case of an audit, you would still have to show support of your expenses paid.

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Tax Exempt Orgs, Your Filing Day May Be Approaching ~ May 15th

April 1, 2011 at 4:53 pm (Adult Industry, Business Taxes, General Tax Information)

If your organization normally has gross receipts of $25,000 or more ($50,000 for tax years ending on or after December 31, 2010), you must file a 990 (or 990-EZ if allowed) Return by the 15th day of the 5th month after the end of your organization’s fiscal year. Many organizations begin their year on January 1st and therefore must file by May 15th. However, a three month extension may be granted by filing Form 8868 before the due day without having to explain why it cannot be filed on time. An additional three month extension may be granted if your organization can prove reasonable cause why you cannot file on time.

* Small organizations whose annual gross reciepts are normally less than the threshold are not required to file annually, but may be required to file a notice by e-postcard.

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