Tomorrow is April 15th aka “Tax Day” surely one of the most dreaded days of the year, at least for everyone who isn’t expecting a refund.  Accordingly, it seems like a good time to remind adult industry members of their tax responsibilities.

Let’s start at the beginning.  Adult talent should recognize that the income they receive from modeling, video shoots, public appearances and dancing is taxable.  This may appear to be a basic point, but many starlets are confused about it or never think about it at all.  This is especially true in the case of “barely legal” models who may have never worked a regular job subject to withholding.  Last year, a porn star on my forum (who in this case was old enough to know better) wrote: 

“If you only shoot so many scenes a year like me because of [living outside California and being a "commuter" starlet] or whatever, you may get lucky and not get a 1099 from alot of the companies. For example, if you shot one scene for say $900, chances are, they may not even bother sending you a 1099, which is nice!   I think there’s a law that you don’t have to pay taxes if the company paid you less than a certain amount. Not sure what that is, though.”

First, just because you don’t receive a 1099 form in the mail does not means the income is not taxable.  You are required to pay taxes on all income earned, whether reported properly to the IRS or not by producers.  If you fail to report income and pay taxes on it and the IRS determines you did so intentionally, you may be prosecuted for tax fraud and go to prison.  It can and does happen to pornstars — just ask Ginger Lynn!  This porn superstar from the 80′s was arrested and convicted for tax evasion.  Court TV reports:  

“According to Lynn, in the late 1980′s the federal government threatened her with tax evasion charges if she did not provide information on the porn industry. Because she refused to turn against her colleagues, the IRS charged her with tax evasion. She was convicted of failing to pay $2,078.00 and sentenced to 3 years probation. She served 4 1/2 months in prison for violating probation for testing positive on a drug test. Her probation period ended on September 22nd 1994.”

Adult industry members should also be mindful that bartering is a form of taxable income.  The IRS defines bartering as an “exchange goods or services without exchanging money.”  An example would be when a photographer agrees to take stills and provide prints to a model in exchange for free modeling services.  “Content trade” shoots may also fall into this category.  When bartering occurs, the fair market value of goods and services exchanged must be included in the income of both parties.  For more information on bartering income see this page.

Some starlets apparently don’t file taxes at all.  This can subject them to criminal penalties for failure to file taxes as well as hefty penalty and interest charges on top of a gigantic tax debt.  Even worse, when the IRS and state tax authorities catch up to you, they will issue an “order to withhold personal income tax” to all the studios they can determine you worked for in the past.  This order requires the studios to deduct a certain percentage of your future modeling fees and remit the directly payment to the tax man.  As a cautionary tale, below is an actual order that I received from the Franchise Tax Board, the California state taxing authority. 

 

It directs me to withhold a whopping 25% of the model’s fees for the next year (at which time they can issue another order).  Note that the amount due as of 08.24.07 was $13,493.15.  Since the California’s income tax rate is 9.3% for persons with an income of $40,346 or more, it appears FTB believes this starlet earned at least $130,000 in 2004 and 2005 that she did not pay taxes on.  Failure to follow the order would make myself liable for the 25%.  What’s worse, this is just state taxes owed.  If the starlet also ignored her Federal tax obligations, I estimate her tax bill would be approximately $52,000 including the 15% self employment tax. 

Of course, most scenes are released commercially and it’s very easy for crafty tax fraud investigators to determine how many scenes a starlet shot in any given year.  Online databases such as IAFD are very useful for this sort of thing.  Of course, even in the absence of bank records, there are many other methods to determine one’s income  including a backwards analysis that looks at regular living expenses.

Producers should note that the minimum amount for businesses to trigger the 1099 requirement when hiring independent contractors is very low – only $600 for the entire year.  And of course, many participants in a typical shoot are independent contractors including talent, makeup artists and photographers.  As those of you  in the adult industry know, this low threshold will be satisfied in most cases by just one shoot in the case of talent, except for simple BJ or solo scenes.  Makeup artists and photographers used more than once in a calender year will also likely earn more than $600.  Be sure to obtain social security numbers or taxpayer IDs and mailing addresses for all independent contractors you do business with!

It’s also worth noting that from the producer side, the decision to send a 1099 is not about being “nice” to talent, it’s about following the law. 1099′s are not a suggestion. If a producer does not send out the 1099 they are subject to strict penalties and the expense may be disallowed by the IRS in the event of an audit. In other words, if the studio does not send out the 1099, and the IRS later reviews the records, they may not be able to deduct the talent fee as a business cost.  Since model fees are typically the largest cost of production this is not good!

If you can’t get your taxes together by tomorrow, it is simple to file an extension with the IRS.  Fill out the short PDF form online, print it out, cut off the bottom portion of page one and mail it to the IRS at the proper address on page 4.  If you live in California and are not including a payment, mail it to the address listed for Fresno.  Make sure it is postmarked by April 15th.  Tax payers who file the extension are automatically granted an additional six months to file (until October 15th).  It’s also worth checking out the IRS’ last minute reminders page or podcast where you can learn how to file electronically for free, the economic stimulus payments (up to $600 for single people or $1200 for married couples), and more.

If you need solid legal advice on small business matters, please do not hesitate to contact me.  Good luck with your taxes this year!

– Snowman

I apologize for not posting here on a more regular basis.  I always have good intentions to and even collect articles and ideas to write about all the time, but the press of business keeps me away from blogging.  As the economy stumbles, I’m buried in Bankruptcy cases.  There’s only 24 hours in a day, but I need about 32!  Nonetheless, I will try to update this blog more frequently going forward.  Thank you for bearing with me.   I wrote most of the article below last month, but didn’t get a chance to finish it until now.

The Elliot Spitzer prostitution debacle has naturally led the nation to ponder why he did it and in turn debate the legality of prostitution once again.  Initially people seemed to focus on the exorbitant rates for services provided by the ladies of the Emperor’s Club which incidentally makes hiring an attorney seem like a downright bargain.  I’m not clear on the exact price “Kristen” charged per hour, but it appears to be in the ballpark of $1000+ an hour.  All in all, Spitzer allegedly spent over $80,000 on escort services according to the New York Post!  At that price, I think most regular folks expected this girl to have supermodel looks, a knockout personality and sexual skills that were approaching that of a goddess. 

The reality was far different.  Turns out “Kristen” aka Ashley Youmans, now Ashley Alexandra Dupre has only slightly above average looks and appears to had a tough life.   According to her MySpace profile, she is from a broken home, alleges she has been abused, admits to abusing drugs and even states she’s been homeless in the past.  Nonetheless, Ashley states she’s “all about the music” and judging by her MySpace “friends” aspires to build a music career on the order of Whitney Houston and Madonna.  She has recorded a couple of dance tracks called “What We Want” and the (the “B” side) “Move ya Body“.  These are available for digital download at Amie Street.  The price for songs on Amie Street vary with popularity.  I understand “What We Want” was recently going for $0.34 of which Ashley kept 70%.  It’s now topped out at $0.98 since the scandal. 

I suppose Ashley’s sexual skills are still a mystery to most of us, but may not be for long.  Larry Flint of Hustler has already offered her a cool million for a nude photo shoot.  Flynt said. “We think it’s not bad for a 22-year-old to make $1 million for a few hours work. It beats what she was making at the escort service.”  In addition, Ashley has reportedly been offered lucrative deals to appear in  hardcore porn scenes from multiple adult studios.  I wouldn’t be surprised if Red Light District has made an her an offer since they have been the undisputed leader in the celebrity porn niche.  Other the last couple of years this feisty studio has publishing discs featuring Paris Hilton, Chyna, Dustin Diamond (Screech) and most recently Joey Buttafuoco and Amy Fischer.  Looking at the high price point of these discs (about $35 each) and relatively high Adult Video Universe sales ranking for many of these titles, this appears to be a very lucrative niche for the industry.

So why did Spitzer do it?  Why risk his political career and marriage to spend time with Ashley, a young lady who clearly appears to be from the “wrong side of the tracks?”  Time magazine attributed it to early childhood influences such as a stern father, “an expansive sense of power and purpose”, an unwillingness to play by the rules and a whole lot of hubris.  The article noted that “in the end, perhaps nothing could save him from his impulses.”  However, I have to wonder if it is not more simple than that.  I agree that Spitzer’s inability to control his impulses played a huge role in his downfall, but I would contend it was his sexual impulses what were running amok.  The male sex drive is very strong and hard wired in our DNA.   It is not an accident as it insures the survival of the species.  All attempts to repress it will fail.  The gigantic scope of the sex industry should validate these observations yet there is always an overly righteous, conservative segment of the population who deny true human nature.

And so, this is why fighting prostitution is futile.  It isn’t called “the world’s oldest profession.” for nothing. Worse than the dubious attempt to eradicate prostitution, it is a complete waste of limited resources that could be better spent fighting real crime. I want local police to focus on bringing murderers, rapists and other violent criminals to justice, not streetwalkers and their Johns.  What two consenting adults do together is none of the government’s business so long as it does not hurt others.  This should be the guiding principle of government when it comes to all sexual matters, whether we are talking about laws related to prostitution, erotic dancing or obscenity.  And of course if prostitution were legal, it could be taxed and the public could better protected against the spread of HIV and other nasty STDs.

As I see it, the real sin is that politicans in the United States are more heavily influenced by the fear of alienating conservative religious zealots than practical economic, safety and public health considerations. It seems they are more concerned about what happens to our souls after death than our quality of life on Earth. This is one area where political “change” is sorely needed.

– Snowman

P.S.  One good thing did come out of this whole mess for Spitzer.  Dennis Hof, the head of the (perfectly legal) Moonlight Bunny Ranch in Nevada has offered him a free, unlimited lifetime pass for sex.  Hof says, “He won’t have to hide his payments or transport Ashley overstate lines,” says Hof. “She’ll be there for him, whenever he wants!”  Hof also offered Ashley employment at $250,000 a year.  The former governor will be required to wear a condom.