Warning to escorts who accept credit cards and Paypal

[coriolis888]

Last night a dear, sweet and handsome escort I have seen ocassionally for a couple of years showed me correspondence that he received from IRS about ten days ago. The escort is well known and has many reviews on this site.

 

The escort accepted credit cards and Paypal. The documents he showed me from the IRS accuse him of not reporting more than 60,000 dollars paid to him by credit cards and Paypal during 2013. The IRS documents assess him with huge penalties and interest on the unreported income. The penalties and interest amount to almost 35,000 dollars.

 

The escort told me that the amounts reported by the credit card companies and Paypal are "probably correct" but he does not remember how much money he made in 2003 from cash payments for escorting. He said he didn't report any escort income, only his income from his day job.

 

Needless to say, he has problems, big time.

 

Escorts and their clients should read the below web link. Accepting credit cards gives escorts quick access to funds and convenience for clients. But, credit card companies and Paypal, are required to disclose payment amounts to the IRS.

 

The escort no longer accepts credit cards or Paypal.

 

http://www.aicpa.org/Publications/TaxAdviser/2015/april/Pages/Tax_Clinic_09.aspx?cm_em=dgcpaphd@gmail.com&cm_mmc=AICPA:CheetahMail-_-NewsUpdate-_-MAY15-_-NewsUpdate_A15MY40_FVS

[+ sync]

Yikes!!

[whipped guy]

I've always wondered about that... Hmmmmm! Well PayPal does give a big of anonymity to the parties involved...

 

However, surprise surprise... I guess that they are also a good "PayPal" with the IRS!

 

Interestng...

[caliguy]

I wonder what the threshold amount is that raises their eyebrows? Clearly they don't do this for everyone that uses it and doesn't report.

[sincitymix]

I think it depends on what the client puts down on why they are sending the money at paypal. I had someone tell me never put down things like business transaction or payment for services etc. That gets taxed.. if they put down gift or something like that it doesn't get taxed.

[mike carey]

Am I missing something or is this just a matter of the IRS asking someone to account for income they have received?

[instudiocity]

Generally, by IRS Code, any cash payment in excess of $600 in one calendar year should be reported on a Form 1099-MISC. This is how the subject escort got caught - the Credit Card Bank and Paypal issued to him IRS FORM 1099-MISC for the total amount they paid out. It is the escort's responsibility then to declare the income and write-off from that income all expenses incurred in generating the revenue.

 

If the escort believes he was employed by the client, the IRS also says you as the client should withhold Payroll Taxes for those engaged in providing household services.

 

The IRS sees income as taxable not matter the source of income. Theoretically, IF you robbed a bank, you owe tax on that income. IRS basically wants it's share no matter how you got it.

[sincitymix]

Generally, by IRS Code, any cash payment in excess of $600 in one calendar year should be reported on a Form 1099-MISC. This is how the subject escort got caught - the Credit Card Bank and Paypal issued to him IRS FORM 1099-MISC for the total amount they paid out. It is the escort's responsibility then to declare the income and write-off from that income all expenses incurred in generating the revenue.

 

If the escort believes he was employed by the client, the IRS also says you as the client should withhold Payroll Taxes for those engaged in providing household services.

 

The IRS sees income as taxable not matter the source of income. Theoretically, IF you robbed a bank, you owe tax on that income. IRS basically wants it's share no matter how you got it.

 

LOL, I can just see it now. You rob a bank, get arrested or go to trial for robbing the bank and then the IRS sends you a notice along with penalties and fines for not declaring your new found "income" lol.. How dare you not report that 24 million you stole from bank 123.

[BabyBoomer]

BENJAMINS

 

~Boomer ~

[instudiocity]

I think it depends on what the client puts down on why they are sending the money at paypal. I had someone tell me never put down things like business transaction or payment for services etc. That gets taxed.. if they put down gift or something like that it doesn't get taxed.

PayPal charges a fee for the transaction if it is for a 'business' purpose. Transfers between friends aren't charged the fee.

 

PayPal, in conjunction with EBay, are set up for transacting business. EBay earns a percentage of each sale, and Paypal earns a percentage of each transaction. They have to account to the IRS for the total amount transacted and through Form 1099-MISC, they 'write-off' what they've paid to you and only pay income taxes on the net income after expenses. They can't write off payments to you unless they file a Form 1099-Misc...

[sincitymix]

Generally, by IRS Code, any cash payment in excess of $600 in one calendar year should be reported on a Form 1099-MISC. This is how the subject escort got caught - the Credit Card Bank and Paypal issued to him IRS FORM 1099-MISC for the total amount they paid out. It is the escort's responsibility then to declare the income and write-off from that income all expenses incurred in generating the revenue.

 

If the escort believes he was employed by the client, the IRS also says you as the client should withhold Payroll Taxes for those engaged in providing household services.

 

The IRS sees income as taxable not matter the source of income. Theoretically, IF you robbed a bank, you owe tax on that income. IRS basically wants it's share no matter how you got it.

 

Kk I did a little searching on paypal https://www.paypal-community.com/t5/Receiving-money-Archive/IRS-transaction-limit-What-is-a-transaction/td-p/165934

It would seem, if the transaction the client selects is Goods and or services, its reported and taxed.

The client really should select the personal transaction option.

[instudiocity]

LOL, I can just see it now. You rob a bank, get arrested or go to trial for robbing the bank and then the IRS sends you a notice along with penalties and fines for not declaring your new found "income" lol.. How dare you not report that 24 million you stole from bank 123.

My dad was an IRS agent. He was also a volunteer deputy sheriff in our home county. He would go with the Sheriff to bust up stills out in the woods. After destroying the still and pouring all the alcohol out, he would then present the still operator with a Tax Notice for Taxes due on the Alcohol the sheriff just confiscated and destroyed.

 

Even though the maker had no Federal Alcohol License, even though he didn't have the alcohol to sell, he still owed the tax on the alcohol he made.

[sincitymix]

My dad was an IRS agent. He was also a volunteer deputy sheriff in our home county. He would go with the Sheriff to bust up stills out in the woods. After destroying the still and pouring all the alcohol out, he would then present the still operator with a Tax Notice for Taxes due on the Alcohol the sheriff just confiscated and destroyed.

 

Even though the maker had now Federal Alcohol License, even though he didn't have the alcohol to sell, he still owed the tax on the alcohol he made.

 

Talk about kicking someone while they are down. That's just hilarious

[instudiocity]

Talk about kicking someone while they are down. That's just hilarious

When he retired, he started calling the IRS, the Infernal Revenue Service. Every check I write and every envelope I address to the IRS is written "Infernal Revenue Service." They don't seem to mind cashing my checks.

[+ poolboy48220]

Isn't that how they got Al Capone finally, on tax evasion? Or maybe it was John Dillinger. I'm not up on my Chicago Gangsters from the 1920's.

[instudiocity]

Isn't that how they got Al Capone finally, on tax evasion? Or maybe it was John Dillinger. I'm not up on my Chicago Gangsters from the 1920's.

It was Capone. Chicago Gangster got Life in Alcatraz on a Tax beef.

[big-n-tall]

If you know how to do it you'll be fine. That escort had 60K in income which means that if he also has within that 200 transactions to make up that 60K PayPal would have issued the govt and him a 1099K. There are certain rules to be aware of when accepting non cash payments, just be aware of them. I claim all my PayPal income anyway just to be safe and only use it as a last resort when a client can't get access to cash or to collect a small deposit.

 

I see another career in your future KJ. Escort Tax Advisor.

[bigvalboy]

Been there, done that, got a few gray hairs because of it too. I have a finance degree with an accounting minor and did partnership tax for a couple of years, one year in a part time job / internship and another at a tax firm in Connecticut.

 

If my accountant looked like you, I would make up shit just to go see him.

[+ Robster]

Been there, done that, got a few gray hairs because of it too. I have a finance degree with an accounting minor and did partnership tax for a couple of years, one year in a part time job / internship and another at a tax firm in Connecticut.

Oooh, brains *and* brawn? Swoon. By the way, sorry to go off-topic, but your scene with Sebastian Kross is H-O-T!!!

 

Rob

[whipped guy]

As noted above for some reason the IRS threshold for someone paying money to an individual is 600 dollars in a calander year. If someone is hired as an independent contractor and is paid $599.99 nothing need be reported to the IRS... You go over that amount and a 1099 - Misc needs to be filed.

 

So technically should we not be sending 1099 forms to the IRS when we go over 600 to any given individual... and at NYC Ptices that comprises a mere two hours of fun. Just a thought!

 

I would guess that many here support higher taxes... and we all do need to do our best to make sure that they are indeed fairly collected... right?!

 

Just my 2 cents... That leaves me with $599.98 to still play with and keep things on the up and up!

[whipped guy]

I'm gonna spend another 2 cents on this thread...

If you know how to do it you'll be fine. That escort had 60K in income which means that if he also has within that 200 transactions to make up that 60K PayPal would have issued the govt and him a 1099K. There are certain rules to be aware of when accepting non cash payments, just be aware of them. I claim all my PayPal income anyway just to be safe and only use it as a last resort when a client can't get access to cash or to collect a small deposit.

 

Oooh, brains *and* brawn? Swoon. By the way, sorry to go off-topic, but your scene with Sebastian Kross is H-O-T!!!

 

Rob

 

DAMN!! Yeah! BRAINS and BRAWN Indeed!!! And may I add YUM as well!!!

[Guest Starbuck]

As noted above for some reason the IRS threshold for someone paying money to an individual is 600 dollars in a calander year. If someone is hired as an independent contractor and is paid $599.99 nothing need be reported to the IRS... You go over that amount and a 1099 - Misc needs to be filed.

 

So technically should we not be sending 1099 forms to the IRS when we go over 600 to any given individual... and at NYC Ptices that comprises a mere two hours of fun. Just a thought!

 

I would guess that many here support higher taxes... and we all do need to do our best to make sure that they are indeed fairly collected... right?!

 

Just my 2 cents... That leaves me with $599.98 to still play with and keep things on the up and up!

 

I feel a NEGOTIATION coming on.

[Kevin Slater]

As noted above for some reason the IRS threshold for someone paying money to an individual is 600 dollars in a calander year. If someone is hired as an independent contractor and is paid $599.99 nothing need be reported to the IRS... You go over that amount and a 1099 - Misc needs to be filed.

 

So technically should we not be sending 1099 forms to the IRS when we go over 600 to any given individual.

 

That requirement is only for businesses. So as long as hiring escorts is a personal expense and not part of your business, there's no need to file a 1099.

 

Kevin Slater

[Scorpio]

That requirement is only for businesses. So as long as hiring escorts is a personal expense and not part of your business, there's no need to file a 1099.

 

Kevin Slater

 

Exactly!

 

Plus the escort had the duty to report the income whether or not he received a 1099...the 1099 merely helped him get caught.

[coriolis888]

That requirement is only for businesses. So as long as hiring escorts is a personal expense and not part of your business, there's no need to file a 1099.

 

Kevin Slater

 

Kevin is correct. We clients are not in the business of hiring escorts, therefore we are not required to file a Form 1099.

 

Some responses above discussed a Form 1099 MISC. The 1099 MISC is not the issue here. My escort friend received a form 1099K, not a 1099 MISC.

 

The 1099 K deals with ANY amount, BIG or SMALL paid by a credit card company or by Paypal to individuals and companies if those amounts accumulate to $20,000 or more, annually.

 

Even if an escort allowed a client to charge only $200, $300, $400 or any other amount, the credit card companies and Paypal add up those small amounts and if the accumulated amount equals 20,000 or more each year, a Form 1099 K is issued.

 

In light of this unfortunate situation, I think it is clear that escorts should not accept credit cards for future encounters.

 

Here is a little about the Form 1099 K

 

http://www.irs.gov/Businesses/Understanding-Your-1099-K