In November of 2010, 35 year-old Brenda Stewart from Denver was charged with 70 criminal accounts including tax evasion, racketeering, witness tampering and money laundering. Stewart ran an escort service.
In 1931, the most notorious leader of the Italian-American mob culture was imprisoned in Alcatraz. He had spent his life smuggling and bootlegging liquor, and became infamous when he was found responsible for the Saint Valentine’s Day Massacre, which killed seven members of a rival gang. His name was Al Capone.
He was busted for tax evasion.
Judy Garland got handed a $4 million bill from the State of New York, plus another for the taxes she had tried to evade in 1951 and 1952. She lost her home for it.
Guess Dorothy learned there really is no place like home.
Luciano Pavarotti, Martha Stewart, Willie Nelson, Marc Anthony, our beloved Dr. Martin Luther King Jr. and even former Vice President Spiro Agnew all have been charged with and served time for evading taxes. Thousands of other, unrecognizable names are on that list.
So why the drama?
The government takes the collection of taxes seriously. To a certain extent, taxes monitor how much we contribute into the pool from which we get our roads built, our army funded, our schools maintained and our healthcare paid (cough). They prepare us for retirement. Bumper stickers spelling out “Freedom Isn’t Free” flood the highways. And they speak truly. Someone’s got to pay for it, and that someone is us.
In the escort industry, most fees are received in cash. Which might make you think you can easily get away with not reporting this income. If you don’t put it into a bank account, no one’s going to know it came into your hands, right?
Wrong. If you file any sort of taxes, own or rent property, purchase/insure an automobile, have healthcare bills or go to a public school or university, they know you’re spending money. Just by having a social security number, as all legal citizens do, you let the government know you’re living off of something, somehow.
What is tax evasion?
Tax Evasion is the act of illegally avoiding paying taxes, failing to report or reporting your taxes inaccurately. It’s different from tax avoidance, which is using legal things such as deductions to minimize the payments you make. Evasion is such a big deal that the IRS has 3,000 agents trained to sniff out those who evade.
Penalties for tax evasion
- Evading Taxes: You evade taxes if you intentionally avoid paying taxes from money that you’ve earned or assets you’ve acquired. It’s charge as a felony. If convicted, you can be imprisoned for five years and fined up to $100,000.
- Filing a False Return: This can include not including all income made on a return, overestimating the amount of something given to charity, undervaluing a property or asset etc. The government doesn’t have to prove that you intended to evade tax laws, just that you did. This is also charged as a felony and, if convicted, carries a sentence of up to three years and a fine of $100,000.
- Failing to File a Tax Return: Every year we’re given a “due date” for our taxes. If we can’t make it by then, we can apply for an extension. If we don’t, we can get charged with failing to file. This usually results in an additional 5% of the taxes we owe, with fines totaling up to $25,000 for the year that no return was filed.
Now before you go into a panic—it’s not like the IRS just knocks on your door and then tosses you in prison. You often get several notices and phone calls before any of these things happen. But taking the steps to register your escort business, claim your income and file your taxes properly helps you to avoid this headache all together in the future.
Reasons to register your escort business
- We’re All Being Watched! As proven by that lovely list up top, anyone can get busted for tax evasion and serve prison time with hefty fees. No one is immune. And while you may think that famous people are more likely to get charged because they’re in the social spotlight, you’re avoiding the issue again. The IRS tracks our spending, knows the average cost of living throughout the U.S., and monitors how we pay for how we live. And because the escorting profession is challenged socially in the United States, the charges put upon anyone in the field are under further scrutiny. Another reason why being organized and legal is important, and how an escort can and should work.
- Registering and filing are not that hard! Because your business as an escort is going to be small you’re not going to rent a storefront, need a health permit or being selling anything there’s not that much paperwork that needs to be done. And we’ve made it even easier for you by clarifying what kind of business you should register as and how you can do this in your state. Refer to the links at the bottom of this page for more information.
- Deduct, deduct, deduct! As an escort, your overhead is low. You’re not renting space or equipment, you don’t need building or health permits, and you may not even be hiring employees. So your taxes are minimal to begin with. And so you can apply that whole tax avoidance thing by deducting clothes, shoes, makeup, transportation, and even bills for restaurants that you rack up for work (though I would avoid any hotel bills, for different reasons). All of these can be deducted from your taxes, further lowering what you have to pay.
- You further the profession itself. The escorting business is a controversial one in these good old United States. The more escorts who register their business and legally pay their taxes, the better for the industry itself. It legitimizes the individual and the industry. And, most importantly to you, it saves you the many headaches and heartbreaks that trouble with the IRS inflicts.
- You’re setting yourself up for bigger things! Chances are you don’t plan on staying in this industry forever, and may be escorting to finance yourself into a new education or profession. By registering your business, you’re becoming an entrepreneur. The skills you gain and the professionalism your social security number garners can only help you to better things in the future.
For more information, refer to our articles:
- How to register your business by state
- Do I want to be a sole proprietor?
- Do I want to be part of a partnership?
- Do I want to be an LLC?
- Do I want to be a corporation?
Please note: SkipTheGames.com is not a legal service, nor are we tax advisors or accountants. We do offer you what we consider our best advice, but if at all in doubt, please consult a professional.