Self-employed stated income?

[TexomaCowboy]

How many ladies submit 1040's to report a stated income? (Asking for a friend... no, really! She is new to the business and new to the US.She has dreams of buying a house, and I told her she needs a good credit history to obtain a mortgage.)

If a high-earning, cash-only individual wants to buy a house or a car, or sign up for a credit card, she’ll need to report some income. To avoid the stiff IRS penalties, as well as the payment of unpaid taxes, that individual should file IRS Form 1040 Schedule C and pay (quarterly) self-employment tax in addition to ordinary income taxes.

The down-side, of course, is that you are paying 30% of your stated income to the IRS. The plus-side is that you are substantiating that you have an income, and can justify why you have so much money in the bank. The greatest benefit is that this annual loss of 30% protects you from the IRS. If they find that you have money, and don't pay taxes, their penalties for Tax Evasion are much worse than sex crime violations by the local authorities, and easier to prove. (Just ask Al Capone).

How does the IRS learn that you have un-taxed income? When you pay for a car in cash (over $10,000), the Dealer will file Form 8300. If you lease a vehicle where that 12-month payments are more than $10,000, again, the Dealer will file Form 8300 with the IRS. If you make a Bank deposit of more that $10,000, the Bank reports that to the IRS.

My on-line research says that many providers do, indeed, file taxes, to obtain loans and credit cards, and avoid evasion charges. I'm just curious what the real world experience is...

[oldbutstillgoing]

Take a look at the American Rescue Plan Act. Some amounts as low as $600 get reported to the IRS now

Another advantage to treating this as a business is you can deduct legitamate business expenses.

[Big b.o.b.1]

Maybe she could get a massage therapist license and put that down as her legitimate business so that she will be able to obtain the mortgage.

[ahab11]

I had a Provider ask me to buy her a 60K BMW and she would buy it back from me for 62K CASH.

I think she had earned most of that from her OF page which has 1000's of members.

I passed on the offer but I have no doubt she had that much cash in a shoe box in her closet.

[TexomaCowboy]

1040 Schedule C requires the filer to select a code for line of business. 711510 (“independent artists, writers, and performers”), 713900 (“other amusement and recreation services”) and 812990 (“all other personal services”) have been considered appropriate by Tax Preparers.

oldbutstillgoing - I've read that strippers can deduct Breast Augmentation.
Big Bob - worth considering
ahab11 - if you had not passed, the YOU would have had to deal with getting that large amount of cash into the bank and the Form 8300 that they would be sending to the IRS.

[Grace Preston]

Originally Posted by ahab11

I had a Provider ask me to buy her a 60K BMW and she would buy it back from me for 62K CASH.

I think she had earned most of that from her OF page which has 1000's of members.

I passed on the offer but I have no doubt she had that much cash in a shoe box in her closet.

If she earned it from OF-- she'd be getting a 1099 at the end of the year. Its traceable income if its via the platform. So if she has that kind of cash in a shoebox-- its not from OF.

Strippers cannot deduct breast augmentation unless its done to a ridiculous level that couldn't be construed as "normal" (Think Busty Heart for those of you old enough to remember her). But a girl going from an A cup to a D cup? Sure.. they can try it, they better just hope they don't get audited.

The "legitimate business" angle is why I started doing at least one trip a year to the legal brothels. Made it a bit easier to retain the deductions, etc. without risk of reprisal upon audit.

[mtabsw]

Just curious - if you report your income to the IRS, and, like Grace wisely did, have supporting 1099's from a legitimate brothel - could the local PD subpoena your tax records from the IRS to support a prostitution charge?

[Chung Tran]

The Chicks I see all file a 1040-SR

[Sir Lancehernot]

Originally Posted by mtabsw

Just curious - if you report your income to the IRS, and, like Grace wisely did, have supporting 1099's from a legitimate brothel - could the local PD subpoena your tax records from the IRS to support a prostitution charge?

I don't believe so. Not that a lot of people probably do it, but the IRS requires you to report all income, illegal as well as legal. The only way that works (in theory) is if the IRS as an institution maintains the confidentiality of returns, individuals within that organization may have their own agendas (see Peter Thiel about that).


Anyway, I'm reasonably sure that for state or local LEOs to gain access to tax returns, it would have to be something truly extraordinary, if it could happen at all, and I'm not even sure the Feds could do it outside of a tax-related investigation.


I could be wrong, but it's Sunday morning, and I've been working on my own taxes and am too fed up to do any research.

[Grace Preston]

I'm pretty sure the only way local yokels can subpoena tax records is in the event of financial crimes or in the event of murder (motive seeking-- etc). I cannot see a local municipality spending the resources and money on subpoenaing tax records for what amounts to a misdemeanor in most cases. Now-- if we're talking actual human trafficking and building a case against a pimp-- I could see it.

Its always wise to pay your taxes, even if its under the table income. There are too many people with an axe to grind who love to "whistleblow" non-payers... and there are too many non payers living lifestyles they cannot justify without showing an income.

[TexomaCowboy]

Grace - thank you for your input. Real-world experiences from a Lady is what I was hoping to hear about. My friend is leary of reporting income and the required record-keeping.

At one web site that discusses this topic (the IRS requires reporting of both Legal and Illegal Income) says that it's really the other way around. "Local police can, and do, notify the IRS that they have uncovered a prostitute or ring of prostitutes who may have violated the tax laws."

If the IRS would be curious enough to investigate, and they find a history of Tax Compliance, they would have little incentive to do anything further. As long as your Reported Income aligns with all of your Assets, there is no basis to investigate. If you own a $4-million home, and a Mercedes AMG GT 53, but only report $50,000 as income, you might be raising a red flag.