Thread: Pay stubs?

For those of you who have a substantial part of your income coming from bellydance....

What do you do when you are required to submit paystubs to show your income? My husband and I are starting the process of buying our first house, and the mortgage brokers want to see proof of income - I don't have proof of half of my income because it is cash based!

Also, last years tax return would not really help me, because I have made double this year with bellydance than what I made last year. And my bellydance income is obviously always changing - there's no way I could predict what my income will be any given year. How do I handle that for mortgage purposes?

Please, all you home-owning bellydancers, help me!

I was always pretty selective when it came to claiming income and expenses. When working for places that paid me by check and that I knew claimed it on their taxes, I would keep that info' for my tax purposes. The cash I would look at income vs. expenses and see whether it was going to be worth claiming (because there is a minimum, of course). The only proof you have is with the check payments. Cash transactions and tips have to be averaged, usually. Remember, that if you claim it as income for a loan, you're then going to be obligated to claim the income on taxes if you earned enough. At least that's my understanding of it all. Maybe there are some accountants out there that have a better idea.

Yeah, I know that I'll have to pay taxes on all the cash stuff (which stinks!), but I need to record at least some of it so that when I apply for mortgages, it looks like I'm making some money!! I'd say about 2/3 of my income (gigs and teaching - the other one third being the day job) is cash. I need to claim some of it or no one will let me buy a house!!

Do you have a designated bank account where you make bellydance only deposits? A business account of some sort? It would have to be bellydance only, not a normal checking account that you use for everything else.

I'm assuming you haven't formed an LLC or anything to run your "business" from. That makes things much easier.

Nope, no separate bank account, and no LLC (it's just me - sole proprietor)

As a self-employed person you can (and from what my accountant tells me, should) file quarterly. So if you are making more than you did a year ago, perhaps you can file now and at least have something more current to show that your income has gone up.

I was recently in a situation where I needed to verify income, and along with my tax returns I was able to use my separate dance account to show a certain amount of deposits, etc. So much of our biz is cash based; it was not ideal, but it was satisfactory. So maybe getting a business account would be a good step. (Can I plug credit unions over banks here? Yes I can!)

Side note--if you are going to use your dance work as proof of income for loans and stuff, make sure it is all square and above board. I went legit quite a while ago and while it sometimes sucks at tax time, it rules for stuff like this since a substantial part of my living is dance related.

I hope more knowledgeable folk chime in, this is a good bellydance biz topic.

Good luck!

Originally Posted by danielabellydance

Nope, no separate bank account, and no LLC (it's just me - sole proprietor)

You don't have to be a sole proprietor to run your business. In fact, you have more protection as an LLC and I believe that the taxes are substantially less. Also, once you are an official legal entity there is the advantage of writing off soooo much through your business. All your bellydance related trips, costumes, etc...become expenses for your business.

You may or may not need to file quarterly. LLC's can be considered flow-through entities. The money you make flows-through to your personal taxes. So you only need to file once. (That's what I do).

I would also suggest the filing taxes quarterly, I'm not sure what else you could do. I thought about doing it, but I would really need to talk to a tax professional. I just file at the enf oyear with expenses written off, etc.

Ok, I like the idea of filing quarterly. I will ask my accountant about that. Yeah, it sucks to be "legit" when it comes to paying taxes, but it's really good for times like these!! And it just gives me more reason to buy more costumes - business expenses!!

I had asked a while back about forming an LLC or some other entity, but most people here said that was not necessary since it was just me....I welcome any more thoughts on it, though.

Thank you for your help!

When people pay me in cash, I make a reciept for my own records, juuuuust to be on the safe side.

I also keep a spreadsheet with every penny in and every penny out of my dance business. It's not really that hard to keep up, and I love crunching the numbers quarterly to see where my income is coming from and expenses going toward. Plus, it makes everything nice and neat for tax time - my tax preparer nearly fell over when I presented him with all my spreadsheets and pie charts (once a nerd, always a nerd). He said some of his small business clients just hand him a folder full of unorganized reciepts!

Another suggestion is to keep a milage log - this year, I'll write off over $7500 in mileage on my taxes!

There is a lot of speculation going on here, so thought I would jump in. I am a CPA and also a performer/instructor.

An LLC is a legal entity separate from yourself, which is used primarily to protect oneself from lawsuits. If it is just you that owns it, then the income and expenses are reported on your Sch. C of your Form 1040 anyway. In most cases, this is overkill, as most of us don't need this kind of protection. My motto is to keep it simple.

You are supposed to report every single dollar of income that you make. That being said, most people in a cash based business do not do this. However, when my clients come to see me, I am duty bound to tell them the rules, as cash based businesses are more subject to an audit...not a fun experience.

In reference to filing quarterly...that is for making estimated tax payments to the IRS. If you are self-employed, the IRS requires that you estimate your income quarterly and pay tax on that....they want your tax money ratably over the year. This will NOT verify your income for loan purposes. However, if your state has a Business and Occupation tax, like Washington does, where you pay on your gross income, you could use that to show the lender the increase in your income over previous years.

You definitely should set up a separate business checking account and get a business license. These not only show that you are a legitimate business, but help you keep track of both your income and expenses, so that at the end of the year you are not scrambling for information.

I figured we'd eventually have a cpa check-in here!! Thanks Gilana.

Personally, I'm happy I have an LLC. But I run an event, not just teach/perform. So I think there's a bit more liability there in terms of the chances of getting sued. LOL. Once I had anything worth losing (like my property) I decided to become a legal entity. I actually run a couple of businesses through one LLC, so it's good protection. And it was my understanding that the tax rates were better for an LLC than a sole-proprietorship.

Samira
Las Vegas Bellydance Intensive

Originally Posted by laura 2

Plus, it makes everything nice and neat for tax time - my tax preparer nearly fell over when I presented him with all my spreadsheets and pie charts (once a nerd, always a nerd). He said some of his small business clients just hand him a folder full of unorganized reciepts!

wow...I wish I were that organized...hahahahaha. I am one of the folks that hands over my folder of unorganized reciepts to my bookkeeper. hahahahahah. ..l;,

Originally Posted by Samira_dncr

wow...I wish I were that organized...hahahahaha. I am one of the folks that hands over my folder of unorganized reciepts to my bookkeeper. hahahahahah. ..l;,

I was responsible for the revenue reporting at my old job, so it just seemed natural to do the same for my own business. You can take the girl out of corporate America, but I guess you can't take corporate America out of the girl. ..g.:

Gilana.. would you mind giving me a basic overview of S-corp verses LLC? I'm going to go one way or the other soon and don't understand which one would be the most advantageous for me.

i have made my living from dance since the 70's.
i deposit EVERYTHING.then total it for my tax man, list deductions, etc..no problem

Mihri,

PM'd you.