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Sex Work and Taxes: Should You File?

Sex Work and Taxes: Should You File?

. 5 min read

Many sex workers who attend my Simple Bookkeeping for Taxes and Higher Profits classes have one major thing in common: the fear of the IRS coming after them if they file their taxes.

“When I think about filing taxes, I have a small panic attack.”

I get it. Many of us are non-conformists, anti-rules, anti-bosses and corporate clock watchers. We got into this business because we like our freedom to make our own rules, work when we want and not fill out forms to beg to go on vacation. Great reasons to be in this line of work.

Except this doesn’t apply when it comes to the IRS.

It’s imperative that you file your taxes and there are a number of major benefits to filing. These benefits include lowering your student loan payments, qualifying for state medical insurance, qualifying for low income housing, getting government stimulus checks and tax refunds, proof of income for housing and/or loans, and perhaps the most beneficial, the peace of mind knowing that the IRS won’t have a reason to talk to you.

“I can’t risk the government finding out. I’ll get arrested.”

In a post on http://www.safewordtax.com/blog, tax attorney Christopher Kirk explains clearly that the IRS does not have the authority to hand over tax returns to any law enforcement unless there is a court order to do so. But they do have the authority to impose fines or arrest you for tax evasion, meaning not paying taxes or under reporting income. Evasion is illegal whereas avoidance is legal.

Avoidance is where write-offs or deductions come into play. Let’s say that your tax bill is $10,000. But you have deductions adding up to $7,000. That makes your new tax bill $3,000. Corporations, businesses and the 1% do this all the time. They find loopholes, deductions and all kinds of legal ways to reduce their tax bill. We can too!

Although our industry isn’t legitimate, you can add up all the costs to run your business and lower your tax bill just like any other business. Christopher Kirk explains this as well in his blog post:

Fortunately, even most illegal business operations can take deductions connections to their illegal activities. While some may find this surprising, it makes sense when considering the fact that “the federal income tax is a tax on net income, not a sanction against wrongdoing.”

Great news! Now what kinds of costs can I deduct? Just about every single thing you spend on your business. Common expenses for us are highlighted:

  • Advertising: websites, photography, business cards, paid ad sites, paid written content, stylists for photo/video shoots, etc.
  • Subscriptions: anything that is a monthly subscription such as blacklists, apps, music services, VPN, anti-virus software, etc.
  • Bank fees charged by your bank for international payments or processing payments if you take major credit cards
  • Transportation: Uber, Lyft, light rail train, bridge tolls, parking, taxis, limos
  • Rent for work space whether it’s a hotel or a separate incall space. If you work out of your main residence, that is considered a Home Office and has its own IRS form.
  • Cell phone. Don’t forget any separate charges for texting or data use.
  • House fees if you work for an agency are deductible as rent.
  • Insurance: Medical, dental, and vision.
  • Work supplies such as safe sex supplies, lube, massage oils, mouthwash, candles, laundry soap, pads, gloves, etc.
  • If you travel, your hotel, travel and food expenses are deductible.
  • If you don’t travel and use hotels, count that expense as rent.

These are some of the major areas to keep track and hold onto receipts throughout the year. It’s worth the effort to lower that tax bill. You can do this by having a special envelope for all your receipts.

Mileage

Now we as small business owners have an advantage over those working a 9-to-5: we can deduct all of our mileage for work. Because we generally conduct the administration side (the marketing, the booking, the researching, etc.) of our business in our Home Office, any time we go out to visit with a client regardless of the location, we get deduct that mileage. One caveat: it must be written. I highly recommend an app called MileIQ, which will track your mileage for you in the background. All you have do it categorize it.

Example: I live in a city outside of San Francisco. My client wants me to visit him at a hotel near the airport. Those 60 miles round trip will lower my tax bill by 57 cents per mile. This applies regardless if the session is at a dungeon, a separate incall, hotel or restaurant.

One woman I know lives in rural Northern California. She travels often throughout the West to set up shop. Because she drives, those miles add up fast for her mileage deductions.

“I haven’t filed in years. Can I start now?”

If you haven’t filed your taxes in years, start with this year. Get this year completed and then work backwards. The IRS usually goes back three years. Even you haven’t kept track or don’t have the receipts, you can still file your taxes with confidence claiming as much as possible. Go through your bank statements, credit card statements, monthly bills and add up expenses in the various categories. You’ll capture anywhere from 80-90% of your costs. It will feel daunting, I know. But if you just do one month at a time, it is far more manageable. Small successes will add up.

“What do I tell them I do for a living?”

A big question I get every class is what do I tell the IRS I do for a living. It’s a great question. Rest assured that the IRS really does not care. You could put down that you are a bootlegger and they wouldn’t blink. They just want their share. It’s actually the Bureau of Labor Statistics that wants to know your profession as this how they can predict which industries and job titles are growing, declining or remaining flat.

If you do your taxes yourself using tax software, there is generally a drop-down box for you to select your profession. Find the one that says “Professional—Other.” Select that one. Keep it vague. When giving your business a name, use your real last name and the word Consulting or Enterprises or some other vague description.

“How much income do I report?”

When deciding how much income to report, tax professionals state to report every single dollar you earn and to file a state income tax return for every state you earned money. If you don’t have any records of your income, start with your bank statements and other deposits into any financial institution. Keep your numbers reasonable. One cannot claim $40,000 in expenses with only $20,000 in gross income.

“You can do this!”

Taxes can be daunting if we make them that way. Instead think of completing the return as part of the privilege of being as independent and having the freedom we so enjoy. There are many resources out there to help you. Good luck!