LOS ANGELES—Nate Mallory made his debut at InterNext in Las Vegas, Nev., during this year’s AVN Adult Entertainment Expo held Jan. 22 to 25 at Virgin Hotels Las Vegas.
Mallory struck a chord with audience members during several InterNext panels dealing with compliance and litigation.
A member of the lifestyle community, Mallory is an attorney from Texas who owns and operates the tax law and wealth management practice The Mallory Firm under the Only Tax Deductions professional services brand with a target audience of adult content creators and indie professionals in the pornography space.
Only Tax Deductions, branded as “the adult industry's tax law firm,” is a cheeky play on the OnlyFans.com name, signifying dedication to adult content creators. During AEE, the Only Tax Deductions team also met with performers and professionals as potential clients and has been making appearances at other industry events to network.
AVN asked Mallory if he could provide our readers, especially independent creators, tips and tricks on filing taxes and approaching the business part of being a content creator as seriously as the content creation part.
Read the full interview below:
AVN: What are the potential legal consequences for adult content creators and sex workers who fail to report their income to the IRS?
Mallory: Adult content creators and/or sex workers who do not report their income to the IRS are subject to penalties and interest on taxes due and, in some circumstances, can face criminal charges for tax evasion or other forms of tax fraud.
All qualifying income must be reported on a taxpayer’s tax return, including any income derived from illegal activities or whether or not a 1099 was received for the income earned. It is important to be familiar with the tax return deadliness, and industry workers should remember the option to file for an extension.
AVN: How can filing taxes help adult content creators and sex workers access financial services like loans, mortgages and credit?
Mallory: To qualify for a loan or mortgage, a lender is going to consider several factors in determining whether to approve the loan and for what terms. This includes the individual’s income, credit score and history, and DTI (debt-to-income) [ratio].
It is common for a lender to require two years of tax returns to process and either approve or deny the loan. This is sometimes the same practice for being approved for a rental. If an individual is not up to date on filing their tax returns, it will severely inhibit their ability to qualify for a loan.
It is wise to be aware of which line items of a tax return a lender uses to determine an applicant’s DTI [ratio], as the process for a W2 employee is different than that of a business owner or self-employed individual.
AVN: What tax deductions or write-offs are available to adult content creators and sex workers to help reduce their taxable income?
Mallory: Adult industry workers are entitled to the same tax write-offs as any other industry: travel, certain meals, use of a vehicle for business purposes, office expenses, home office deduction and more.
This is when using a tax professional can result in significant savings in taxes owed. A tax professional has the knowledge and experience to determine any and all tax write-offs available to the taxpayer. Due to the unique aspects of sex work, some tax write-offs may also be available to individuals and businesses in the adult industry.
Some potential write-offs that are frequently discussed but require individual analysis to determine if a deduction would be allowed are clothing and costumes used for content creation and breast augmentation. Significant case law and tax legislation must be considered when determining these more unique deductions.
AVN: How does properly filing taxes contribute to financial security and long-term stability for independent adult content creators and sex workers?
Mallory: Filing taxes on time and correctly will help industry workers set themselves up for financial success and security by eliminating or limiting tax penalties and interest.
Having an organized and professional book of business will help with qualifying for loans or acquiring assets on credit. It will also help keep a current and accurate record of the person’s financial plan to grow their wealth and meet their financial goals and retirement needs.
AVN: What steps can adult content creators and sex workers take to ensure they are filing their taxes correctly and in compliance with IRS regulations?
Mallory: Working with a tax professional, preferably one with substantial education and licensing to support their knowledge of tax law and procedure.
But it is also important to have a tax professional who is familiar with the adult industry and what sort of expenses qualify as an “ordinary and necessary cost” incurred to operate one’s business.
This can be quite different for businesses and content creators in the adult industry compared to other industries in the workforce. Adult industry workers should also be sure they are completing the correct forms (taking into consideration if a business entity needs to file specific tax forms) and filing them with the IRS on time.
Follow Only Tax Deductions on Instagram @onlytaxdeductions and visit the law firm’s website at onlytaxdeductions.com.
