Despite Uncle Sam frowning on the "immorality" of the sex industry, he doesn't find any problem dipping into your G-string to pull out his share of your cash. Sam might not be the in-your-face pimp most of the year, but come April 15, he's looking closely to see what his "hoes" have been up to.
While professional sex industry workers have an established network of accountants and experienced advisors to help them maneuver through the tax season, what about the amateur? What about those of you who are independent contractors for phone sex and Webcam companies? What about those of you who sell your photos online? What about those who moonlight their humble 9-5 job being a gay porn Webmaster?
Come tax time, you might be clueless exactly what you should count as income or what the penalties are if you don't fill out your forms correctly. Plus, how do you walk into H&R Block and try to prove that your nipple clamps were a business expense?
For the amateur, the first question is about whether you should claim the income that you made via your involvement in the sex industry. The answer: You betcha! The last thing I want to see is some poor MILF who dabbled as a Webcam performer paraded in front of TV cameras as a tax invader. Not only is that a sad and embarrassing thing to happen to someone, it's not good for the industry. I mean, do we need to give Middle America any more ammunition?
So yes, you have to claim any and all money that you made as an Amateur (and that includes you Webmasters, too). Many amateurs do not support themselves solely on their sex industry cash. The difficulty comes in combining their extra income with paycheck stubs. All of a sudden, you might not be so comfortable going to Mom's favorite accountant, but pretty confused on how to combine the two income streams and properly process it via Federal and State taxes on your own. In this case, unless you really have the nerve, going to the free taxman at your local library may also be out of the question.
So what are you going to do?
My best suggestion is to take advantage of the various online and software tax programs that often cost less then half of what a live tax preparer would. The software will walk you through the steps and it will never judge you. Popular programs include TurboTax, Abacus Tax, Tax Cut, and Tax Act. (Remember, you will need to purchase filing for Federal and State taxes.) You might not get all the money coming to you, but then again, you never know if your accountant may not give you all the tax breaks once they know where that extra grand came from.
If you believe that an accountant can't be judgmental, I once had my taxes done after having my first baby (out of wedlock). This accountant was my mom's favorite but you could tell he greatly disapproved of my "lifestyle" and I had to point out my tax breaks to him as he skimmed over them - and this guy wasn't any novice! So remember, accountants and tax preparers can put their own two cents in and they can also "red flag" your tax file for the IRS. Unless you buy a protection policy, you will be held accountable for any mistakes. My suggestion: Don't put your relationship with the IRS in the hands of someone who only works four months of the year.
In 90 percent of the sex industry jobs, amateurs are working on an "independent contractor" (IC) basis. Now that may sound nice at first, not having to have taxes taken out of your paycheck and you're free to leave the job whenever you want. But the clarification of whether someone is an "IC" or an "employee" comes into debate when viewed by the IRS. Employees yield more in taxes to the government, as both the employee and employer must shell out a percentage of the earnings at the end of the year; and the IRS is keen to suddenly announcing that someone was really an employee in an IC agreement and penalizing through hefty fines both the amateur and the company they worked with. Yes, they can do that.
So, if you had an IC arrangement, the first step is to make sure you keep your contract that states your agreement with a company and make sure that the phrase "non-negotiable" never appears. If you cannot negotiate the terms of the job, you are an employee, not an IC. But this isn't enough. You must abide by and make note of the following federal guidelines for IC: You must be able to make your own hours; you are not required to follow any of the rules or regulations that the company's employees must abide by; the company's cash flow cannot depend on you; and management cannot tell you how to complete you job nor have any control over how you perform your job.
To clarify even more, the IRS considers an employee "a person performing work for another and is subject to orders, control and direction of a business." On the other hand, an independent contractor is described as "any person who renders service for a specified result, under his/her own control."
As you can see, you're probably falling into that "employee" category. So how do you make the extra step to detach yourself from it? It might not be soon enough this year, but it is recommended that you purchase yourself a business license. Most are available through your city for under $50 for the whole year and you can simply use your real name and call it a home business - though it is recommended that you check with laws in your city governing the use or production of pornographic material (even if it's in your own home). Some cities will not allow phone sex to occur in certain city residential zones and (again) it pays to be safer than sorry. Having a business license might add a little more to the cost of doing your taxes (but now it's a tax write-off) and some extra regulation, but you will get that nasty IRS man off your back if he comes calling.
But, armed with a business license, all of a sudden you are obligated to pay a little more in taxes. As long as your work does not produce tangible results, such as photos, VHS tapes, or CD-ROMs, you will not need to charge and pay sales tax. And by "tangible," I mean you can pose for a photo shoot but unless you own the glossies, you're not creating tangible merchandise for sale. In certain states like California, you will need to get a sales tax exemption to have this apply, so be sure to do some research on your state's Board of Equalization Website. This site will also give you the list of what you can and cannot do in your state as well as links to more state information that will help to keep you out of trouble.
The business license may appear to be a pain in the butt, but now comes the real fun for those in the adult industry: Everything from garters to condoms to the state-of-the-art Webcam can be written off of the taxes you owe (as long as you can prove that you used it for your business). If you take my advice and prepare your own taxes, please don't think that you can make up phony receipts or try to take off your spa vacation (the Brazilian wax may count) thinking no one would be the wiser. That's called an audit, baby! You are recommended to hold on to your receipts and tax records for at least eight years in case the IRS feels it needs to go after you (but they can go back as far as they like).
You should keep all your receipts in a nice, neat, and well-organized system. You should make a point to write down reasons for each purchase and keep very clear records on all monies coming in and out, where it came from, and who it is going to. When you do your taxes and have business receipts that are related to travel or food, make sure you keep very specific information dealing with these transactions, as they are often red flags for the IRS to come in for an investigation. Also make sure you avoid filing your taxes too early, as there is a mandatory number of audits randomly selected each year. Try not to submit your taxes sooner than mid-March; e-filing tends to have the most audit results as they arrive sooner.
And to those who've heard that U.S. citizens are not required by law to pay taxes but they give up that right every time they file a tax return - yes, it's true! But don't get up on your soapbox just yet; the IRS has yet to lose that battle ? and lets avoid mixing the militia with the porn industry.
