“Regardless of what you do—if you’re in business for yourself, especially—you need to follow tax laws,” Lori St. Kitts, the tax preparer behind TaxDomme.com and the author of The Tax Domme’s Guide for Sex Workers and All Other Business People, told Reuters last year.
You can use apps to keep track of tips, and don’t forget about business expenses.
But you can also let apps on your phone do the heavy lifting, as Vice notes. As of the time of this writing, the apps TipSee, Tip Tracker, Just the Tips, and ServerLife are available on the Apple App Store and on the Google Play Store.
St. Kitts told Reuters that sex workers can deduct business expenses from their legal income, though the tax code isn’t entirely clear about which business expenses are legitimate for such workers. “But you’re pretty safe as long as it doesn’t touch the genitalia,” she added.
In fact, exotic dancer Cynthia “Chesty Love” Hess made headlines for getting the U.S. Tax Court to consider her breast augmentation as a tax-deductible business expense, with Special Trial Judge Joan Seitz Pate agreeing that Hess’s implants were necessary “stage props.”
Use Form 1040-ES to calculate estimated tax
St. Kitts told Vice that exotic dancers can pay the IRS in installments to avoid a large tax burden come tax season.
“Putting enough aside for taxes would require paying quarterly estimated taxes,” she added. “You use Form 1040-ES to figure out your estimated tax. You can use your prior year income, credits, and deductions to figure out the amount of income you expect to make to figure out your current year estimated tax.”
You shouldn’t consider tip income to be “under the radar.”
Rus Garofalo, founder of the freelancer-friendly tax firm Brass Taxes, told Vice that income earned in cash might not feel like “real money” but should be treated as such when it comes to paying taxes.
“Things go from ‘under the table,’ which is a cute colloquialism, to tax evasion when it’s over 25 percent of your gross income,” he said.
As a hypothetical, Garofalo cited the example of a person who tells the IRS about only $10,000 of the $14,000 they earned in cash. “Maybe you saved a grand, but is committing a felony worth a grand?” he said.
Christopher Kirk, founder of Safeword Tax Service, told Reuters the advice he tells his sex-worker clients. He says, “The penalty for tax evasion is much greater than for sex work.”