Whether it’s a full-time job or just a side hustle, taxpayers must report gig economy earnings on their tax return. Understanding how gig work can affect taxes may sound complicated but, it doesn’t have to be. The IRS offers several resources to help gig economy taxpayers properly fulfill their tax responsibilities.
Here are some things gig workers should keep in mind.
Gig work is taxable:
• Earnings from gig economy work is taxable, regardless of whether an individual receives information returns. The reporting requirement for issuance of Form 1099-K changed for payments received in 2022 to totals exceeding $600, regardless of the total number of transactions. This means some gig workers will now receive an information return. This is true even if the work is full-time, part-time or if an individual is paid in cash.
• Gig workers may also be required to make quarterly estimated income tax payments and pay their share of Social Security and Medicare taxes.
Check worker classification:
• While providing gig economy services, it is important that the taxpayer is correctly classified.
• This means the business, or the platform, must determine whether the individual providing the services is an employee or independent contractor.
• Taxpayers can use the worker classification page on IRS.gov to see how they are classified.
• Independent contractors may be able to deduct business expenses, depending on tax limits and rules. It is important for taxpayers to keep records of their business expenses.
Pay the right amount of taxes throughout the year:
• An employer typically withholds income taxes from their employees’ pay to help cover income taxes their employees owe.
• Gig economy workers who are not considered employees have two ways to cover their income taxes:
o Submit a new From W-4 to their employer to have more income taxes withheld from their paycheck, if they have another job as an employee.
o Make quarterly estimated tax payments to help pay their income taxes throughout the year, including self-employment tax.
The Gig Economy Tax Center on IRS.gov answers questions and helps gig economy taxpayers understand their tax responsibilities.
Tag: cash
If your work is illegal, do you still pay your taxes? How do you deposit large amounts of cash without alerting the IRS? Alongside standard financial talk of high-yield investments and Excel spreadsheets, the Tumblr Sex Worker Helpfuls addresses a more specific set of questions like these. It’s one of several sex worker-run websites and message boards that offer financial advice to strippers, cam girls, sugar babies, dominatrices and escorts about everything from STIs to personal safety—and money is a popular subject.
“In the old days, it was the kind of things you might talk about to other girls if you worked in a brothel together or at an escort service,” says Maggie McNeill, a sex worker who has been in the business for 18 years and runs the blog The Honest Courtesan. “Nowadays, you strike up friendships on [message] boards and talk to each other.”
It’s no wonder that finances attract special concern. “The illegitimate and stigmatized nature of this work makes handling money feel really dicey and kind of stressful,” said Savannah Sly, president of the social justice organization the Sex Workers Outreach Project. It’s also why sex workers are sometimes excluded from the mainstream financial industry. Things that so many people take for granted, from having a bank account to taking out a car loan, can be difficult and unnerving, if not outright impossible, propositions—and they often require guidance.
The most fundamental issue is how to deal with large amounts of cash, particularly in escorting. Checks, which are unreliable and can reveal a sex worker’s identity to their clients, are generally off-limits as a form of payment. Many online payment services, like PayPal, have policies against “certain sexually oriented materials or services,” and you better believe sex worker Tumblrs are keeping a running tally of which services are sex worker friendly. Fiona Stone, who runs Sex Worker Helpfuls, says the most frequent financial questions she gets is about whether PayPal and similar services are “a good, safe option”—she says they aren’t. Some online payment processors have even seized sex workers’ accounts and put a hold on their funds. Earlier this month, a court ruled that PayPal customers who have had their accounts frozen might be entitled to settlements, but that hardly changes these companies’ policies.
This leaves cash as the best option, and cash can be dangerous.
Kate D’Adamo, national policy advocate at The Sex Worker’s Project, says policies like PayPal’s further marginalize sex workers and push them into “more and more isolation and into more and more vulnerability.” She explains, “If someone knows you work in the sex trade, they know you probably have money in your house, so you’re that much more likely to get robbed,” she said. “Having to be paid in cash because you can’t use PayPal means that you’re walking home at night or getting in a cab somewhere with five-hundred dollars on you.” And, of course, if a sex worker is robbed, he or she is likely less comfortable reporting it to police.
“I try not to keep that much (cash) on hand so that I can afford to lose it,” says McNeill. “I have a safe, it’s not a big one, I don’t want to keep around more than I can fit in that safe.” The sex work blog “good girls don’t” advises, “one thing you should invest in is a good fire-proof safe.” The post goes on to recommend, “Don’t hide cash in obvious places, like your mattress, the freezer, your toilet tank, and so on. If you’ve seen it in a movie, other people have, too.”
Of course, sex workers can always deposit cash in banks accounts, and many do, although as the “good girls don’t” post warns, “anything you deposit in a bank account, pay bills with, or buy large items with leaves a paper trail.” That can be of special concern when engaging in illegal sex work.
That’s not to mention the hazards in any line of sex work when dealing with bank tellers. “There’s not a lot of people who operate in cash so you’re considered to automatically be suspect if you are operating in cash,” said Sly. She still gets clammy going to the bank to make deposits. “I constantly feel like I’m gonna get busted,” she said. It doesn’t help that tellers, male ones in particular, tend to make jokes about large amounts of cash—things like, “Big night at the casino, huh?”
“I try to avoid people and use ATMs,” she said.
On top of that heap of financial burdens, there’s the additional distrust among sex workers of the banking industry as a whole. In 2014, Chase shut down the accounts of several high-profile porn performers, calling them “high risk.” The company denied that it was because of the nature of their professions, although many sex workers remain skeptical. Credit card companies have limited how sex workers can spend their money, too: Last year, responding to threats made by Sheriff Tom Dart of Cooks County, Illinois, Visa and MasterCard stopped processing payments for adult ads posted to the classified site Backpage.com. (Late last year, an appeals court ruled that Dart’s actions violated First Amendment rights.)
Of course, all of this cash tends to raise questions about taxes. It’s a frequent topic across sex worker advice sites, and the message is almost always: do them. “It’s that old principle of ‘only break one law at a time,’” said McNeill. As a post on Sex Worker Helpfuls, which is re-blogged from another site, puts it, “You don’t want to get hit with a six figure bill and/or jail time at some point over the next few years because you weren’t doing your taxes.”
The post goes on to detail necessary forms—1040 for an individual tax return, Schedule C for business income and 8829 for a home office deduction—and the need for income records. “Even if you lack accurate records, give it your best shot and file. Even if you can’t pay right now, file,” it reads. “Even if what you do is illegal, file (you don’t have to write down what you do. We are all ‘entertainers’).”
Other posts provide tips on recording income and offer up Excel spreadsheets for keeping track of tax deductible expenditures, including makeup. But even with all this guidance it can still be terrifying terrain, especially for those engaging in an illegal trade, and sex worker-friendly CPAs can be hard to come by. One sex worker who asked to remain anonymous told me that after she was upfront with an accountant about the nature of her work, he wouldn’t stop texting her after-hours.
This is why countless Tumblrs recommend Lori St. Kitts, the so-called Tax Domme, who has written the book, ”The Tax Domme’s Guide for Sex Workers and All Other Business People.” She was working as a tax preparer and phone sex operator when she noticed financial misinformation being passed around on sex industry message boards. When she started posting her own tax advice, people asked her to file their returns, and her specialty was born. Now she runs her business alongside her mother, a.k.a. the Financial Madam, under the tagline “bringing your tax liability to its knees.”
“Sex workers are no different than any other business, but their deductions are a bit more interesting,” Kitts said, pointing to questions about things like lube and sex toys. “There is this idea that because they deal in sex that they are all shady and criminals when the truth is that most are just trying to work a legal business under unfair laws and scrutiny.” She says she’s seen “more vanilla businesses try to work around the tax law than sex work businesses.”
In fact, Mistress Matisse, a Seattle-based dominatrix, says she shies away from deductions out of fear. “I do worry a great deal. With my tax guy I’m like, ‘We are declaring this, we are paying taxes on it.’ I’m very conservative about what I deduct.” Her accountant suggested that she write off her home office—because, as she puts it, “half my house is my office”—but she’s too concerned that it will raise a red flag. “There’s a tax on me basically because I can’t bring myself to the attention [of the IRS],” she said.
But, as Matisse found, doing your taxes can be critical for gaining access to other financial tools, like loans. She first started doing her taxes thanks to a client who was an accountant, and then, many years later, a client who was a realtor helped her secure a mortgage. In part because she had a record of her income from paying taxes, she was able to call herself a “self-employed consultant” and get her mortgage application approved. That doesn’t mean the process was easy. “I felt like such a fraud, even though I was like, ‘I know I have the money for this,’” she said. “I swear I lost like seven pounds from the stress during the month when we closed.”
As with any self-employed person—or anyone in a profession that operates in large amounts of cash, like the restaurant industry—it can be difficult to save. Sites like Sex Worker Helpfuls provide pointers and spreadsheets for setting up savings goals, whether it’s for buying a house or for retirement—but an online listicle is not quite as motivating as a relentless HR person who keeps asking about your 401k elections.
McNeill simply planned to live off of her husband’s retirement income, but they have since divorced. “I’m now in position at 49-years-old where I don’t have any savings of any kind,” she said. “I’m faced with a future in which, basically, I’m going to have to keep working one way or another probably for the rest of my life.”
Sometimes, though, people luck out and find a financial mentor: Sly had a friend who helped her open a Roth IRA and Matisse happened to have a client who convinced her to get an IRA. But Matisse emphasizes that this, along with clients who were knowledgeable about taxes and real estate, was total luck. “Our basic financial safety should not depend on that sort of thing,” she said.
Many sex worker rights activists argue that all of these financial burdens—from having to carry dangerous amounts of cash to overpaying on their taxes out of fear—are yet more examples of how criminalization harms sex workers and leaves them more vulnerable. It’s also part of why sex workers have to rely on financial “wisdom … being transmitted though message boards that the government wants to shut down,” as McNeill put it, referring to sites like RedBook, which the feds shuttered in 2014. It had been a place where sex workers both advertised their services and found community with, and advice from, fellow sex workers.
For now at least, there are still sites like Sex Worker Helpfuls. “It’s very important,” said Stone. “[Sex workers] are putting in work all the time to help make our lives less bogged down by a system that gladly takes our money but sneers at how it’s made.”
By Tracy Clark-Flory and Leigh Cuen
Categories
Finances and Sex Work
Starting out or working in the sex industry can be daunting in terms of the financial aspects. Money is coming in, sometimes more than you’ve ever made or even seen before. It can be a bit overwhelming to plan and handle your money. I am not at all a tax professional, financial planner, or really anything but a whore with some experience. This is just advice from me to you, not intended to substitute for professional (well, that kind) advice. It was also not intended to help you avoid the system. Pay your taxes!
First and foremost, you need to plan your budget. How much money do you need to pay rent, utilities, credit card payments, loans, car payments, food bills, and so on? How much money do you need each week or month in order to cover the necessities? Figure this out first. Everything else after this amount is disposable income.
Based on your budget, some market research, and the guidance of other sex workers, calculate your rate. I’m not an expert on this. There are others who can help you, like the book The Internet Escort’s Handbook by Amanda Brooks. Similar principles apply, no matter what type of sex work you do.
Set up a book-keeping system. Having no way to track how much money is coming in and going out will end up hurting you. You’ll have no way to know what you’re averaging and how much you’re spending. This can be as simple as a writing down everything you make in a notebook or as complex as a color-coded spreadsheet or financial software. A good, basic system is the date, the number of or type of appointment or job, and the amount made.
Figure out how to handle your cash. If you are working for a club, dungeon, or company that issues you a paycheck instead of you dealing with cash, skip this.
Decide what you want to do with your cash. Keep in mind that anything you deposit in a bank account, pay bills with, or buy large items with leaves a paper trail. If you want to keep your cash handy, one thing you should invest in is a good fire-proof safe. Keeping a lot of cash on hand is risky as a sex worker. If others find out, you can be at risk of robbery. A safe can help. Don’t hide cash in obvious places, like your mattress, the freezer, your toilet tank, and so on. If you’ve seen it in a movie, other people have, too. Consider having a dummy safe. This is a safe you hide in a more obvious place (under your bed, for example) and keep a small amount of cash in. Then, get a good, sturdy, floor-bolted safe or wall safe to keep more in. If a thief breaks in, the thief will quickly discover your dummy safe and leave your main safe alone.
Depositing cash is a good idea. Consider either a safety deposit box or a bank account. It’s a good idea to have three bank accounts: a personal checking, a savings, and a “business” checking. This can just be a personal account you filter all of your money through before it goes into your personal account. Keeping your money separate can demonstrate that you are organized in your business book-keeping.
Now that you have a budget and are handling your money, start some basic financial planning. What are your long term goals? Are you doing sex work to pay for something, pay off something? A really good rule of thumb is to have three months’ of expenses in savings. That way, if you want to take a break, you get fired, transition, the market turns around, you are hurt and can’t work, you’ll have a cushion. You’ll also have money in case of an emergency, like a car breaking down or a medical bill.
If you can afford it, consider basic health insurance, catastrophic only. If you are young and have no major health problems, you can usually get this cheaply. It will have a high deductable (sometimes $5,000 to $10,000), so it’s not for your annual exam or going into the doctor when you have a cold. It’s just in case you have a major event happen. If you get hit by a car or something equally terrible, the medical bills can wipe you out. Having insurance can protect you.
Once you have met your savings goal of three months’ expenses, start a savings plan for other things. If it’s for school, for a car or a house, or something else, think about your investments. This is my weakest area because, to be honest, having enough money to invest has never really happened to me before. But consider seeing a financial planner for this service, or someone like the Financial Madam. You can make low risk investments, like a savings account with interest, savings bonds, or certificates of deposit. You can also make higher risk investments, like stocks. Having a long-term retirement plan is an awesome idea.
In general, try to be smart with your money. If something is a business investment (like a computer to check your email on, a car, or sometimes clothes), talk to your tax preparer about what is deductible. Otherwise, try to avoid the impulse to spend all of your money just because it’s there. I went through a period like that when I first started working. I had an awesome time and got some lovely shoes, but when I needed to get out like right now, I had absolutely nothing to fall back on.
On the issue of things to do with your money, consider reinvesting in your business. Again, some of these things are tax deductible. Setting up a business model is a good idea. Decide what your long-term goals with your type of sex work are. Use some of your income to place ads in the right places to tap your target market. Get professional photographs. Set up a website. Make little investments to set yourself up for long-term success.
When things get more complicated, there are many more issues to consider, like becoming incorporated or becoming an LLC. These are things I know nothing about at all, hence, talk to a financial planner, an attorney, and definitely your fellow sex workers. Being smart with your money is the best way to gain your independence.
janebrazen.wordpress. com/2009/07/08/finances-and-sex-work