Tax 101

This information serves as a basic background on how to file taxes as a sex worker. womenswhork is not a professional tax service. Please consult with a professional tax service before filing your taxes.

As we know there are many perks to sex work, however there is one that is more of a perceived perk than an actual benefit of the job. Many people believe that in sex work you do not have to pay taxes, allowing us to pocket all of the money we made without having to pay out anything to the government. Though legally you should always report the income you have made, the fact that we do not have to pay taxes is partially true. For most of us we are in an underground job, with little to no paper trail back to you, there is almost no way that the IRS would be able to know of money made through sex work. However, to participate in any part of society, including buying a car, buying or renting a home, or making any major purchase, you will need to show some form of income, and you will need to provide tax returns.

Many full time sex workers make enough money to support a family of five, but have trouble even renting a one bedroom apartment from a reputable leasing company, because they have no way to show their income. Many sex workers may not even enter money into the bank, because of fear that they will be audited, when they do not pay taxes on a high amount of money in the bank.

On top of all the negatives of not paying taxes, when you actually try to do it, people may not understand. You may go to accountants who think you are lucky and tell you that you do not have to pay taxes. You may work at a club, and people may automatically think you are an independent contractor, without taking any other options into an account. Full Service escorts may feel that they cannot even put the money they make into the bank. Some strip clubs account for you and you may receive a w-2 or 1099 from them. But if you never received a 1099 from your club, and if you are a “spoiled girlfriend” or “second wife” the chances are that the closest business classification for tax purposed that you fall into is the sole proprietor.

I am in no way a tax professional, or have any tax training, but information is readily available to business owners who are looking for the best way to file taxes, in which they will have to pay the least amount out to the government. This information should be taken as a basis for your knowledge, so you can have some sort of idea of what you need to ask for, and what you need to prepare, before going to a tax professional.

1. A sole proprietor is a business owner, who does not take any other corporate form.

Corporate formations (including Corporations, S-Corps, and LLCs), involve protection for your personal assets, in case the business comes under financial or legal problems. For example, if you own an LLC, and your employee sues you for some reason, only the assets of the LLC will be able to be targeted by the lawsuit. Personal assets, such as your home or car cannot be targeted by the lawsuit except in extraordinary cases. For the average sex worker, you will be in business by yourself, and will be paid in cash, with no employees or possible liability. You are also not in a partnership, because you are working for yourself and only yourself. Because you do not need any of the other corporate forms you will be a sole proprietor.

2. Independent Contractors receive a 1099-MISC from the person they work for, if you did not receive this, you are not an independent contractor.

Strippers are often told that they are independent contractors based on the nature of their work. You work in a building that is owned by someone else, and that building employs other people (such as bartenders, bar backs and security). Independent Contractors are paid by the business they work in for their services. Strippers are paid by patrons of the business they work at, and pay rent (house fee) for use of the venue. If you received wages from the strip club you work at, as well as a 1099 tax form (lol I know you didn’t), then you can file your taxes as a 1099. However, if not, you are more than likely going to be paying taxes as a sole proprietor on a Form 1040, on a Schedule C.

3. As a sole proprietor, your business taxes are not separated from your personal taxes.

Since you are considered self-employed (as a business owner without a corporation), you will have to pay self-employment taxes in the form of business and personal taxes. To calculate your self employment tax you will have to know your Business Net Income.

Business Net Income = Gross Income - Deductible Expenses

Your Gross Income is how much you make total, and your deductible expenses are all the expenses that go into your business. This is anything that is used specially for your business. For the average sex worker this definitely includes outfits, shoes, and a business phone line. This also includes marketing expenses for advertisements and photo shoots. Your deductible expenses cannot include anything that is not used solely for the purpose of your business. So for example, if you buy hair extensions, which help you make more money at work, but you also wear those hair extensions all the time (to dinner with your boyfriend or to your college graduation), that cannot be considered a deductible. A good accountant will find all your deductibles and make sure they are accounted for so you do not have to pay them in your income tax. You can register a separate business account with your bank, but you do not have to register your business with the state. You may also qualify for a business credit card at your bank, to make it easier to keep track of business expenses.

4. Organization is Key

The most important part of paying taxes as a sex worker is organization. You must be smart with saving your money as well as monitoring where it goes. If you put money into a bank account as soon as you make it, it will be easier to track how you actually spend the money. You can also make a business account with a bank to create a business card, and only use that card when you make work related transactions. It is very important to know how much money is coming in or going out. You must stay up to date on your finances for the purposes of taxes. If you want sex work to make you truly financially free, you must keep your finances in order.

As a sole proprietor and independent business owner, you will have to pay a quarterly estimated tax, as well as file an annual return. Four times a year, you will have to pay about a quarter of what you expect to owe throughout the entire year. The good news is that the approximate tax you will need to pay out is only a total of about 15% of your income (including FICA and Medicare).

Overall the tax process may seem daunting at first, but hopefully the information above simplified it enough. The most important parts of taxes are keeping accurate records, otherwise it is just basic math. Consulting with a tax professional locally will be helpful, but there are also online tools. HR Block has tax services for free (if you qualify), and Turbo Tax is also available. Overall this should give you a better background on what you have to do to file taxes, so you will be able to actually use the money you make to further your life.

Sources: www.irs.gov; www.thebalance.com; www.theselfemployed.com.