011 - Do I need to worry about back taxes as a drag queen?

On this episode of the podcast I dive into Part 5 of my 8 part series of the tax basics and legal fundamentals for drag queens and LGBTQ+ entertainers. Today's lesson is covering back taxes and if you have them, you are certainly not alone.

If you're new to the series, take a pause to check out my intro episode and then Part 1 of the series. Missed the most recent lesson? Check out Part 4.

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To kick things off, let's check in on your current tax situation,. Would you say:

  1. I'm absolutely crushing it

  2. I'm doing pretty okay

  3. I'm paying quarterly taxes and keeping my books up-to-date but my systems could likely be improved

  4. I'm not paying quarterly taxes but I've filed my tax returns on time each year and don't owe any back taxes

  5. My tax filings are up to date and I'm already on a payment plan for back taxes

  6. My tax filings are up to date, I owe back taxes, and I currently don't have a solid plan for them

  7. I'm behind on filing taxes

 

The IRS provides a Taxpayer Roadmap. While it looks like a complete hot mess, if you owe back taxes it may become your best friend.

Zooming in on the Collection section, we can see a caution symbol labeled "Notice of Intent to Levy and Right to Collection Due Process Hearing." If you get an IRS form in the mail you can search it on the roadmap. When you click on a box, it will give you more info on the letter, where you are in the process and how you can respond to that letter. This roadmap will help you keep track of how close you are to going into collections.

I made a simplified version of the taxpayer roadmap that covers your tax payment whether you're prepared and processed on time or examined and sent to collections if you have back taxes.

Appeals and litigation is what you go through if your tax return got examined and you don't agree with the result so you appeal or file a suit in tax court.

During the processing phase is when the Information Returns Program (IRT).

The point of sending a 1099 is so the IRS can match tax deductions to your tax return. Not reporting the 1099 will result in you getting a letter saying you're estimated to owe that much and you need to make a payment for the 1099 you didn't report.

Other types of informational forms are K1s which are issued by payment processors like Venmo or Paypal. When you go to file taxes, go and look at every place online where you get payments and see if they have a form for you as they don't typically send them in the mail.

A lot of places that hire drag entertainers don't often send a 1099. That's a them problem, not you because you are still legally required to report the income regardless, but make sure you ask if they are going to send one before you file because if you file early you will have to go back and edit your return which is a pain.

A CP 2000 is the form you will get if the IRS says they didn't see you report the income they have record of. Don't always assume a CP 2000 is correct because the IRS can be wrong about them. For example if you reported the income without having the 1099, you can submit proof you already submitted the info on the 1099.

There are three types of audits that may happen.

  1. Correspondence Audit - You get audited via letters and is the least serious type of audit.

  2. Office Exam - You bring all your tax documents to the IRS office to review

  3. Field Audit - The IRS goes to your place of work to review your tax information. Self-employed people don't usually get pulled for field audits,

If you're listening to this episode because you already have back taxes, you are most likely in collections. You can end up in collections if:

  1. You owe taxes and you don't pay when you file

  2. If the IRS makes a swift assessment through the IRT program

  3. You owe taxes through the examination process i.e. you are audited and you don't resolve the money you owe in tax court or you do but you still owe money.

If you receive a tax letter, there will be a notice number and you can search that number on the Taxpayer Roadmap for more info.

I dive deeper into back taxes inside my book and my Business of Drag Basics course which will be offered to you at a discount after signing up for the free copy of my bookkeeping template.
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๐Ÿฆ Twitter: https://twitter.com/dragtax 
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๐Ÿ–ฅ Website: https://www.dragtax.com 
๐Ÿ“ง E-mail: [email protected]
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THIS IS NOT LEGAL ADVICE - Everything contained on this channel is meant solely for entertainment and informational purposes. Nothing herein should be considered legal advice nor does anything on this channel create an attorney-client relationship of any sort. Please seek guidance from a licensed attorney before making any legal decision.
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