As Tax Day nears, how should sex workers file their taxes?

//Illustration by Madison Lauterbach | mlauterbach@msmayhem.com

Editor’s note: Sources in this story are referred to by pseudonyms or their working name to protect their identities. 

Every year, thousands of sex workers across the country file their taxes just like the rest of us. However, unlike the average 9-to-5, sex workers could face some unique challenges come tax season.

Sex work encompasses a wide range of professions with varying degrees of legality—escorts, cam girls, dominatrices, strippers, sugar babies and everything in between. But regardless of legality, a stigma remains that leads to discrimination, especially on websites such as PayPal, Venmo and OnlyFans.

One Denver-based dominatrix, Goddess Lux, has had several such issues with payment processors. She was kicked off Venmo two years ago and has been unable to make a new account since. Although her PayPal has never been shut down, it has been flagged. Lux now uses CashApp and her Square card reader, but her experience with payment apps has left her feeling hesitant to use these services at all.

“I’m afraid to face scrutiny from [payment apps],” Lux said. “I’ve actually had my Venmo shut down because of [sex work], and you are not able to start a new one unless you have different information.”

This can make it more difficult to keep track of earnings, pay taxes and find a place to live. Sex workers face a different set of hurdles if they work in cash-heavy industries like strip clubs, where they often work as independent contractors that make their money from cash tips. 

One Denver-based traveling dancer named Dallas makes most of her income through cash tips at clubs. She’s been in the industry on and off for 11 years, which has given her an abundance of experience when it comes to managing her taxes. 

“I don’t recommend traveling and dancing to everyone because it can definitely be a huge financial loss if you don’t know what you’re doing,” Dallas said. “You could really get screwed and lose a lot of money or end up in a bad situation.”

Preparing taxes for one job can be a headache on its own, but Dallas faces the additional challenge of paying taxes for several across state lines. She has to keep track of myriad 1099s, as well as which clubs have already paid taxes on her earnings so she avoids double-paying. She keeps a journal where she documents her income at every club she’s worked at and their house fees, which is what she pays the club for the opportunity to perform. When it gets closer to tax season, she pulls up her bank statements and manually highlights all work-related expenses.

For many sex workers, this is a career and business. Some opt to create LLCs that legitimize them on paper. Dallas, who is also a former bookkeeper, said these are typically registered as fashion consulting or life coaching companies. This not only helps them write off business expenses but also allows them to later create other opportunities in which they can invest their money.

Dallas tries to stay as current on tax law as she can in order to navigate the complexities. “Unfortunately, I think most young people aren’t very tax literate,” Dallas said. “They don’t really teach us about it in school or anything. So it’s pretty confusing and the laws are constantly changing too on what you can and can’t write off as a small business.”

That concern is shared by independent tax preparer Kristofer Steinbrecher, who’s based out of Fort Collins. Steinbrecher is currently working toward his Bachelor’s in accounting but has been preparing taxes for five years. He’s now amassed a client list of a few dozen people he helps with filing or consultation on state and federal taxes. Several of those clients are sex workers, mostly camming models and strippers. 

“The way that I approach it, [sex work] is just like any other self-employed job, right?” Steinbrecher said. “The biggest thing is just educating.”

Steinbrecher compared sex work to the marijuana industry, where it might be legal on the state level but illegal federally. In a perfect legal scenario, like in Nevada where full-service sex work is allowed in licensed brothels, things like breast augmentation and STD testing can be written off as business expenses at the state level. This can also be translated to other types of sex work on the legal side of the spectrum like cam modeling and stripping. Where it differs from marijuana-based businesses, however, is that legal sex work expenses can also be deducted federally. 

“[If you’re a] stripper, you can claim crazy things like breast augmentation, all of your lingerie, any props that you’d be using,” Steinbrecher said. “In [full-service] sex work, unless you could prove a modeling side on paper, anything that you’re buying for it, down to your boob job or required STD testing, none of that can be claimed against your income federally because it’s not a legal job federally.”

When filing federal taxes, it comes down to a lot of “creative labeling” and knowing when you can write off business expenses. When dealing with large firms like H&R Block or TurboTax, sex workers can face significant stigma when they out themselves to their accountants. 

“You’re never a sex worker. You’re never a cam girl,” Steinbrecher said. “You work as a professional model. It sucks that we have to label things that way, but you get creative with it.”

This makes it more complicated when claiming things directly related to physical sex with clients, such as condoms or dental dams, or even STD testing. Steinbrecher said those things would be difficult to pass off as a business expense for a model. 

Steinbrecher has several tips for sex workers in general, but especially those who provide full service. He says there are several loopholes that make the work appear more legal on paper. Escorts can take advantage of pornography laws by stating that a client is licensing a video rather than directly paying for sex. Steinbrecher also suggested full-service workers have clients sign contracts.

“Sometimes signing contracts on what [the client] is paying for comes in handy,” Steinbrecher said. “And that way you can prove this is what we are officially agreeing to, and then other things that happen, happen. When it comes down to any legalese that comes with that, having proper paperwork to back it is a huge thing.”

Steinbrecher said the least complicated thing sex workers can do year-round to prepare for tax season is keep records of expenses, just like any other self-employed person. 

“You keep records of absolutely everything you spend because your expenses are going to be this huge thing to offset your income,” he said. “You record every penny that comes in and you report every penny that goes out.” 

That includes things one might not think of. Steinbrecher said sex workers may think of writing off toys, lingerie and props but forget all about their rent if they work from home, credit card processing fees and website fees. 

The biggest thing is to not be afraid of filing your taxes, Steinbrecher said. It can seem scary the more complicated one’s taxes get, but fears like being reported to local authorities or outed by the IRS are mostly unfounded. He recommends reaching out to an independent professional for help utilizing that creative labeling and avoiding breaking tax laws. 

“It’s Al Capone stuff, they always catch you on [not paying] your taxes, they don’t catch you on what you’re doing illegal otherwise,” he said. 

Filing taxes, especially on a state level, also makes it much easier to file for unemployment when disaster strikes. During the COVID-19 pandemic, thousands of people with out-of-date tax records lost out on desperately needed stimulus checks. 

“This was a huge issue with some people this last year across all self-employed individuals,” Steinbrecher said. “So having your taxes paid and up-to-date can prove loss of income if something like a pandemic hits, or if something else unrelated would keep a person from working.”

Last but not least, having tax records for income makes it worlds easier to finance a new car or get a mortgage on a house. 

“We’re definitely paying our taxes because we’re trying to buy houses, we’re trying to buy cars,” Dallas said. “We’re trying to invest our money. The IRS doesn’t really care what you’re doing. They just want your money. The IRS isn’t the police.”

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