What shout I do about my taxes?

My advice is call Sir Lancelot. He is correct. I was 1099 at one point and thought it would work for you. He is correct. It will not. Sorry for the misinformation. I was trying to help but I was incorrect. I was right about this, do not use Turbo Tax and hire a pro.

Score one for Traci! A tax savvy sex pot. Hubba hubba!

Thank you guys! You're a great help. I've learned a lot today!

I've learned a lot today! Originally Posted by tracibrooks

Me too..... That your turning me on..... Nice pics.....

This is not legal or suggested...just some history...ok?

In some parts of the US, it was common for providers to give cash to a small business operator and trusted client, who would in turn, convert the cash to a real paycheck and make all the necessary deductions, etc and then issue a very real W-2.

Make it easy. Pick a time to start your business like June 1st. That way you don't have to go backwards.

Also having a savings plan for retirement and for emergencies will also serve you well.

You might want to contact Dharma as I thing she was setting something up for the ladies and she has a wonderful massage business. Originally Posted by Duke

Thanks but I was only having classes for ladies who wanted to learn about investing. I have to agree with everyone who said "get a CPA". I wouldn't trade mine for anything. I keep receipts and he takes very good care of me. Of course it's not free and I don't want someone who doesn't charge. Pay for expertise.

The correct term is "self-employed"; you would receive a 1099 only if your clients held up their end of the legal requirements and obtained your real name and SSN, then sent you a 1099-MISC at the end of the year if they paid you more than $600. Like that's gonna happen.

For people with no withholding, estimated tax payments are due on April 15 for the first quarter, and June 15, September 15, and December 15 after that.

How do you figure how much estimated tax to pay? Well, you can essentially do a tax return each quarter and pay that amount, but there's an easier way to avoid penalties for underpayment. If you pay the IRS at least 90% of the current year's eventual tax total OR 100% of your total tax liability from the previous year, you'll be okay.

If you consider taking the home office deduction, you should know that the IRS has a three-part test for determining the deductibility of all or part of your home’s cost: The part of your home used for business must be used exclusively for business, it must be used on a regular basis for business, and it must be your principal place of business. Many tax pros consider the home-office deduction to be an audit magnet, and I'd suggest that whatever marginal benefit you might derive from the deduction isn't worth the additional complications and risk.

As a self-employed individual, you must pay self-employment tax and complete Schedule SE. This will be 15.3% of the net income computed on your Schedule C, which is the schedule you use to report your business's income and expenses. (The rate is equal to the 7.65% you would have deducted from your check if you were an employee, plus the 7.65% that your employer would pay.) You can take a deduction for one-half of the self-employment tax on Line 27 of Form 1040.

Someone above suggested that your clothing would be deductible. That's true only if it has no other practical use outside your work -- uniforms can be deductible for some people who wear them, but business suits aren't.

I once worked with a tax accountant who said, "It's all deductible -- until they catch you." I'm sure many escorts don't comply with the tax laws and suffer no consequences. The one complicating factor in this business is if a client knows your real name and, for some reason, decides that the IRS needs to be informed of a potential case of tax evasion, you'll have some problems. Originally Posted by Sir Lancehernot

Just wanted to expound a bit on Sir Lanchernot's sage advice:

With respect to the home office deduction, there is a back-end complication that should be considered. The deductions for home office use taken over the years to reduce taxes may not be too great in any single year, but will add up over time. When the home is sold, there is a corresponding offset applied that will lower the "basis" of the home purchased(what you have in it), for purposes of figuring gain on the sale.

In our current federal tax environment of a liberal exemption from capital gains on sale or exchange of principle residence, it may not be a factor for many of us. But should Congress revisit the issue.....

I wonder if Quicken Home & Business would help keep track of mileage, income and expenses, as well as, file quarterly estimated taxes?

Traci, I would love to meet you very soon.

The guys here have left some great advice, however honestly I'd save the cash until retirement from this hobby (if you are in school and retire when you graduate, etc.) and start paying real taxes then. In the meantime.....save up!
Second, think twice about purchasing a house. I am 8 years into a mortgage and I am 10 grand upside down because of the housing market. The housing market is one of the worst investments since 2006 and no end in sight. Rent a home instead! People like to argue that you don't own your home and throw that money away every month, well your mortgage lender (bank, etc.) owns your home for 15-30 years depending on your note.
Just something to ponder, research, and think about. I have wanted to move and my house was on the market for 18 months and never sold, so I'm a little bitter.

I first want to clarify that the poster above is "Sir LanceHERNOT" rather than me - Sir Lancelot.

However he is correct in saying you are highly unlikely to be able to file using the 1099 forms. In addition, anyone else doing that is at increased risk of being audited at this point.

That approach to filing is primarily intended for independent contractors who do work for a company. Unfortunately, it has been abused and sometimes (often?) used to help companies avoid paying social security taxes and other benefits for their employees. In fact, a whole industry has risen with it's main goal being to help companies do that. It then makes it much harder - and less likely - the IRS will get all that collected since it depends on all these individuals diligently setting aside 25% or so of their income. Most individuals find that kind of discipline challenging. The IRS is very concerned about that right now - and they have been vocal about it.

Because of that, it was one of the main points of focus in congress recently. And is almost certain to be a point of emphasis by the IRS in the next few years.

I applaud you Traci for wanting to pay your taxes. You are being smart, honest, and legal in doing so. Almost all of the "big sentence" cases we read about related to this hobby are tied to tax evasion.

Start keeping records, be cautious taking risky deductions, and find a licensed tax accountant the first year or 2. Perhaps you could classify yourself as an independent consultant. Then you can probably use the forms your tax accountant uses this year and next as a pattern in the years ahead - at least until your business model changes substantially - and plan to file your own taxes at some point down the road.

By the way, your conversation with an accountant might go something like this - and could probably be done over the phone.

I'm thinking about starting a private consulting business due to the difficulty in finding a regular job right now. Could you tell me what forms I would likely need to file and how much you would charge for that? Could you advise me on what to do with the quarterly filings and let me just pay you for the annual tax filing?

If they ask about specifics, just say youre not sure. You might say Maybe personal shopping for busy moms - or something general like that.

Compare the response and charges from 3 or 4 accountants, then select the one you feel most comfortable with.

Once you file the first time, it will seem pretty easy after that.

Good luck and be good.

SL

I would not recommend a CPA. They do not keep up on the latest tax laws. I would recommend an H&R Block tax office. It will be cheaper and safer than a CPA. If you decide to go there, request a veteran tax preparer who is also an Enrolled Agent to assist you with your taxes. Here is info on an Enrolled Agent (http://www.naea.org/memberportal/Res.../whatis_EA.htm) Besides, most enrolled agents are also licensed CPA's.

The IRS does not care what you claim as your profession. They just want their cut.

I first want to clarify that the poster above is "Sir LanceHERNOT" rather than me - Sir Lancelot. Originally Posted by Sir Lancelot

I used to be Sir Lance-a-lot. Then I got married,

I would not recommend a CPA. They do not keep up on the latest tax laws. I would recommend an H&R Block tax office. It will be cheaper and safer than a CPA. If you decide to go there, request a veteran tax preparer who is also an Enrolled Agent to assist you with your taxes. Here is info on an Enrolled Agent (http://www.naea.org/memberportal/Res.../whatis_EA.htm) Besides, most enrolled agents are also licensed CPA's.

The IRS does not care what you claim as your profession. They just want their cut. Originally Posted by FMaster

H&R Block? You've got to be kidding. I see about five years worth of tax returns for about 50 - 75 personal injury clients a year. Of those, we really pay attention to those of clients of have big cases. Say ten clients a year. Plus any others whose returns are fucked up. I'd say 90+% of the fucked up returns come from non-accountant tax preparers. And many of those come from H&R Block.

I will concede that the reason most come from H&R Block is probably because they are a market leaders. But the types of mistakes (some amounting surely to fraud) are egregious. Don't try to save money. Go to a high quality accountant. My accountants, both in-house and outside, are quite up to date on the annual changes in tax laws. If yours aren't, get new accountants.

I would not recommend a CPA. They do not keep up on the latest tax laws. I would recommend an H&R Block tax office. It will be cheaper and safer than a CPA. If you decide to go there, request a veteran tax preparer who is also an Enrolled Agent to assist you with your taxes. Here is info on an Enrolled Agent (http://www.naea.org/memberportal/Res.../whatis_EA.htm) Besides, most enrolled agents are also licensed CPA's.

The IRS does not care what you claim as your profession. They just want their cut. Originally Posted by FMaster

H&R Block? You've got to be kidding. I see about five years worth of tax returns for about 50 - 75 personal injury clients a year. Of those, we really pay attention to those of clients of have big cases. Say ten clients a year. Plus any others whose returns are fucked up. I'd say 90+% of the fucked up returns come from non-accountant tax preparers. And many of those come from H&R Block.

I will concede that the reason most come from H&R Block is probably because they are a market leaders. But the types of mistakes (some amounting surely to fraud) are egregious, like having a married person file single. Don't try to save money. Go to a high quality accountant. My accountants, both in-house and outside, are quite up to date on the annual changes in tax laws. If yours aren't, get new accountants.

All good information. I am a successful (or so I am told and IMHO) financial/business professional and own and have owned many businesses over the years and I recommend using a CPA if you have anything other than a W-2 form and itemized deductions.

I believe CPAs have to have 180 hours of college, (MBA level and many of those hours are required to be tax and accounting related and 40 hours a year of continuing education), Enrolled agents 0 college hours (they only take a test given by the IRS), H&R block uses their own training courses (there is no other requirement to work there). I believe it was Albert Einstein who said "The hardest thing to understand is the Income Tax"

I know of a tax professional (CPA) business adviser who has worked with providers and related entertainers and establishments in the business for over 20 years now. He is very, professional, confidential and discreet (and has been damn good with my taxes)!! The tax savings and having some one there if the IRS knocks (they are extremely active right now) more than cover his cost.

He has met new clients I have sent to him and gone over how he can help them (no charge for initial meeting and/or if they decided not to move forward). Feel free to pm me for his contact info.

R

Happy Hobbying !!!