Another Tax Question

[MissCroft]

I didn't want to hijack Miss Maya's thread so thought I'd post a new one to ask my question.

I did my last two years' taxes through H&R Block. When the guy who was doing them for me asked what I did for a living, I said I was an "adult entertainer". He wasn't exactly sure what to do with this so he asked the manager. She said that we didn't have to specify my profession and just to check it off as 'other' employment. No big deal I thought....

I received a rather ominous looking letter in the mail yesterday from Revenue Canada. They are asking me to please provide my source of income, including the name, address and the Business Number of the payer, if available. I've talked to a couple of people and have gotten varying advice so thought I'd ask here - what should I say? Adult entertainer? Escort? Or should I just say I'm self-employed (which is what I claimed in previous years)?

I'm worried about eventually being audited or something...I actually don't make as much money as many people think. (A lot of guys on this board seem to assume that all SPs are making upwards of $80,000 a year). I don't work all that often and have had hiatuses here and there over the last few years where I saw very few people, if any (particularly last year). Not to mention expenses such as transportation (both personal drivers and taxis are getting very expensive these days), outfits, advertising, cell phone bills, etc. I've also been ripped off a number of times... I worry that Revenue Canada could one day try to claim that I made more money than I've claimed. I admit that I sort of have to guess at my income since I've never really kept track of it. But I digress....and I'm getting a bit paranoid, lol.

Anyhow, any advice? PMs are welcome as well.

~Chloe~ XOXO

 

[danmand]

I would only suggest, that you next time use a "real" accountant instead of the HR block desk at the mall. It is not any more expensive.

 

[Fabulous]

I use Quick Tax; http://www.intuit.ca/index.jsp and do my own taxes. It's very simple and you can adjust your earnings to fit into a certain tax bracket and most of all, it calculates everything for you, so you can assert it before you send it out. Plus it's private and you don't need to tell somebody else what you do.

Regarding your self employment; you can tell Revenue Canada whatever you want: escort, therapist, councellor, babysitter, squeegy, pizza delivery, lawn mower, fashion, style advisor...... Just make sure your expenses match the profession.

 

[LatinDancer]

Audits are not as bad as they sound. Your explanations are all very reasonable. If you have a calendar showing all the holidays you've taken, that would be proof that you did not work a lot of hours. Revenue Canada will be happy to be receiving something at all.

 

[Oldedawg]

Be upfront about your occupation. If future corresondence goes beyond just requesting basic information, be careful about deposits into your personal bank accounts; they will want to see that your total deposits for the year reconcile to the income you reported. If the deposits are greater than the income reported, they will want an explanation for the differences. Lastly, go to a professional to have your taxes done, its worth the money.

 

[hairyfucker]

my advice it to get a real part time job so that you have docs for Rev CA and the accountant. You could still do your entertaining and be easier to fit into the system.

as to do right now list yourslef as self employed as previous.

 

[MissCroft]

my advice it to get a real part time job so that you have docs for Rev CA and the accountant. You could still do your entertaining and be easier to fit into the system.

Well, even if I do have another part-time job, I still have to claim all sources of income. I agree it is much easier when you only have a 'real' job with 'real' documents...

Some good advice here...Thanx a lot guys!

 

[oldjones]

Revenue Canada has, in the past, been quite boastful about not careing (or sharing w/ other agencies) how it's 'clients' earned their money as long as they were honest about amounts and expenses. I believe the classic case was a Madame in Saskatoon or Regina they often cited as a fine upstanding taxpayer of many years standing.

Seems like your prime misstep, if any, was merely to be less than specific about profession, rather than amounts, based on bad professional advice. Get a better professional, be open and honest w/ her and have her deal w/ CRA on that basis. They won't use a hammer to get a just few dollars more than you're willing to hand them on a plate after a chat.

 

[hairyfucker]

Well, even if I do have another part-time job, I still have to claim all sources of income. I agree it is much easier when you only have a 'real' job with 'real' documents...

Some good advice here...Thanx a lot guys!

sorry didn't mean to imply anything about the "real" part. just did not know how to discribe a job with a paper trail.

Bottom line is be honest, state accuratly yoru income and self employment. possibly pay a few dollars "tax" to get them off your back and then go back to business as usual.

I had a similar set of letters this year. They claimed that I underpaid and provided me a new amount, and interest on the "unpaid amount" based on when it was due. I sent the ~$12K and have not heard a peep since.

The real rule here is if they feel you paid a fair amount and do not appear to be taking any off the top they will leave you alone. There are many more fish to fry for them.

 

[great bear]

This thread is too taxing for me.

 

[Fabulous]

LOL! That's called tax evasion!

OOOOOOOOOOOOOPS

 

[peteeey]

I saw an item on the news this week about Revenue Canada getting a ton of money from going after grow ops. And that they didn't share any information with anyone.

Revenue Canada has, in the past, been quite boastful about not careing (or sharing w/ other agencies) how it's 'clients' earned their money as long as they were honest about amounts and expenses. I believe the classic case was a Madame in Saskatoon or Regina they often cited as a fine upstanding taxpayer of many years standing.

 

[Damondean]

I agree

Not to worry, this is a routine form that they now are sending out to a lot of self-employed and to so called "Independant Contractors".

What they are trying to do is create a database of payments between people to see if any relationships develop.

For example, you are a drywaller who works for cash but are honest and report your income so you can be seen to own your house legitiamtely. You report your income on your tax return.

Well CRA wants to know who the guy who is paying you cash to see if he is paying otehrs cash under the table. Maybe that GUY is the General Contractor for home renovations. Maybe HE is not paying his taxes! So, by returning that form with the details of who paid the drywaller CRA can track down the General Contractor AND other cash trades!

I'd suggest you disclose to CRA that you are an "Adult Entertainer" and that you simply do not know the names of the people who pay you.

I agree with Rubbermeister. From Ms Croft's post it sounds like they want to nail down her "employer." if there is one.

If she writes back to say that she is self-employed, that should be end of it.
A proper accountant answers such queries on behalf of the client. But then he probably would not have ticked off "other employment" in the first place.

CRA likes to query any big difference from previous returns.

Good luck MsCrof. No need to panic.

 

[tboy]

LOL! That's called tax evasion!

Thanks dude, saved me the trouble from stating the obvious...lol to blatantly come out and admit that you screw around with your reported income....*shudders*.

From the info posted it certainly sounds like whoever did your taxes they didn't put you into the self-employed category which is indicated by rev can's question: who's your employer....

A couple of things you have to watch for: being an sp, you should be collecting gst on all your sales. If you haven't, rev can could come back to you and assess what your gst collection should have been, and add that to your tax burden. (that is, if you've claimed more than $35K income from self employed earnings...I think that is the break point...)

As I reccommended to maya, pick yourself up quickbooks basic or regular. It's not that expensive and makes it relatively easy for you to track your sales, and your expenses so at year end, you have all your ducks in order. In your business you don't take names so you can set up customers like: customer a customer b etc.

I think it's called a tertiary audit where they don't actually come to your home or have you visit, they just do it over the phone. I went through one many years ago and they were actually very polite and just wanted to verify some of my expense deductions. Once I explained to them what they were, and had the amounts readily available, they didn't pursue it further.

 

[oldjones]

About the GST: what tboy says. My ATF dancer who pays her taxes as dutifully as the rest of us was dinged for GST on her self-employed income. Her alternative—whuch CRA was very negative about—would have been to file as an employee receiving $20 piecework wages from a whole bunch of unnamed employers. So she paid.

At least she gets to deduct expenses—DJ fees, hair and make-up, costumes, license and such from her gross income.

Oddly, CRA showed no interest in enforcing Lyin' Brian's smug boast that his GST was an 'honest tax' because no one would be allowed to hide it in the price.

But watch for it guys: we should be paying $21.20. Let's all hold our breath 'til the signs go up, shall we?

 

[train]

I received a rather ominous looking letter in the mail yesterday from Revenue Canada. They are asking me to please provide my source of income, including the name, address and the Business Number of the payer, if available. I've talked to a couple of people and have gotten varying advice so thought I'd ask here - what should I say? Adult entertainer? Escort? Or should I just say I'm self-employed (which is what I claimed in previous years)?



~Chloe~ XOXO

Be honest , tell them you are an adult entertainer . If they ask for more details tell them you are an escort which in itself is not illegal. Tell them it is largely a cash business and the name of the payer is not available.

You're only problem in an audit is if your bank deposits exceed your income declared.

 

[dragnbiz]

Your biggest mistake was changing your employment status. As long as you are consistent in how you file your taxes and what your source of income is, they will leave you alone. As "self employed" what you are and are not allowed to deduct is much different. You need to pay your taxes in installments and do not need to pay certain things that an "employee" has to. As an "employee" you have different deductions and are not entitled to certain other expenses and deductions. For example as an employee your employer must pay a share of health taxes and UI and CPP. Because you changed your status but likley did not change how you paid taxes or your expenses your return was immediately flagged. They think that your employer is not paying the proper payroll deductions.
You have 2 choices now:
1) fess up and be specific about what you do and be prepared to possibly pay more in taxes.
2) notify them that the mistake was made by H&R and that your employment has not changed over the last few years
Either way the chances are that you will be audited because you have now been flagged. Revenue Canada does not care if you are an SP. They do not enforce the law, they just want you to pay your taxes.
NEVER EVER go to H&R Block unless you are Joe Blow regular citizen. The people at H&R know NOTHING about taxes other than what they learned from taking a course. H&R can do your taxes if you have a T4 and few RRSP's or a simple small business. I could do that same return in about 20 minutes. Consult a professional (like me .. wink) and they will inform you of what you can and can't do.
Like everything else in your chosen profession, fly under the radar and no one will know any better and no one will bother you.

 

[Primetime21]

2) notify them that the mistake was made by H&R and that your employment has not changed over the last few years

NEVER EVER go to H&R Block unless you are Joe Blow regular citizen. The people at H&R know NOTHING about taxes other than what they learned from taking a course. H&R can do your taxes if you have a T4 and few RRSP's or a simple small business. I could do that same return in about 20 minutes. Consult a professional (like me .. wink) and they will inform you of what you can and can't do.
Like everything else in your chosen profession, fly under the radar and no one will know any better and no one will bother you.

While i agree dragonbiz that there are some at H&R that do not know a lot about taxes, i actually DO and have been working there for 14 years. You wouldn't believe how many times we have to fix problems created by so called professionals like you you do not take the time to do an accurate tax return. There are many accountants that do not ask the right questions and will do anything to get the client a refund thinking that CRA will not catch what they did. From what Miss Croft wrote all that the person at H&R did not do was put a description of the job in the info section of the T2124 form (that is the self-employed business statement). She didn't say they didn't claim expenses, just that they didn't fill that form out completely.
There is also the fact that CRA checks random things on tax returns every year, for example rent receipts, medical expenses, etc. And this year they may been looking for people who had other employment income entered on the business statement form. CRA has hired more auditors the last couple of years so more people can expect to get post-assessment letters. That doesn't mean your tax return was done incorrectly, it just means they are looking to verify a few things or looking for proof as some deductions are not required to be sent in at the time of filing.
Do i agree that there are some situations that would warrant not going to H&R, the answer is yes, but i could make the same statement about so-called professionals as well. If you do go to H&R i would suggest asking for someone who has experience before sitting down with anyone. I have completed upwards of 15,000 tax returns over the years and would definitely put my record up against almost any accountant.

 

[trisket]

Miss Chloe, save your receipts on everything that helps you look good and makes your business work.

The list could include lingerie, clothes, makeup, fitness classes, hair styling, laundry, dry cleaning, hotels, a portion of your home and utilities, computer and internet, taxis, gasoline, car maintenance and payments, etc.
Everything that helps your business should be looked at to see if it can be deducted, get a good financial advisor who is knowledgeable about self employment.

Talk to some of the other women on here who are savvy about making the business work.

 

[scrooge]

From what Miss Croft wrote all that the person at H&R did not do was put a description of the job in the info section of the T2124 form (that is the self-employed business statement).

How is it that H&R would prepare a T2124 when the taxpayer is "(other) employed"? There is no way this form would be prepared for someone who has employment income once it has been established that employment is the source of income. The H&R preparer (or worse yet, the supervisor!) who helped Ms. Croft does not even know the source concept of income!

I am sure there are good ones like you who work at H&R, but as another poster mentioned, it is possible to get a tax return preparer at H&R who is not trained otherwise than by the 4-6 week course H&R offers.

On another note, perhaps an accountant can shed some light here - I thought gross receipts from an "illegal business" are fully taxable but expenses are not deductible?