Question -
I work as an escort in New York, Boston, Philadelphia, Las Vegas and Miami. All my work is in the US but I live in Canada.
Where and how do I file my tax return?
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david ingram replies:
Good question and you are not alone. Every year I prepare sevcral similar tax returns. I presume you advertise on line as 'visiting' with websites like 'Miami Escorts' and the 'Darkside'.
A way back when in the 70's, I helped out Xaviera Hollander, AKA, 'THE HAPPY HOOKER' ( http://en.wikipedia.org/wiki/Xaviera_Hollander or http://www.timesonline.co.uk/tol/news/world/europe/article4407114.ece or http://www.xavierahollander.com/xaviera-hollander ) when she lived in Vancouver after leaving New York and being persecuted by the Knapp Commission responsible for a major expose of the New York Police Force.
Xaviera now runs two bed and breakfasts in Holland and Spain. she was born into a Prisoner of War camp in Indonesia in The Swcond World War and went on to be the Sex columnist in Penthouse Magazine. You ae in good company as they say.
Back to your question.
It does not matter whether you are an escort or selling a product in the USA as a Manufacturer's Agent.
If you are working in the USA, you are supposed to be filing a US tax return. Yuo can find this a little clearer at www.centa.com Got to the top left hand corner box and click on Newsletters. then click on November 2001. the first page talles Canadians when they have to file a US tax return and the next 11 pages tells Canadians how to make their CANADIAN MORTGAGE INTEREST deductible on their Canadian return. In your case for instance, if you pay all of your earnings down on a mortgage and have a line of credit agaisn tth ehouse for business expenses, you can very quiclkly turn a non-dedcutible mortgage into a deductible mortgage.
(In other words, you fly to New York and gross $20,000.00 You pay all the $20,000 down on your morgage. You use a business line of Credit to pay for your plane tickets, hotel rooms, food and cell phone and advertiisng.) Next Monthe you go tot Vegas and do the same thing. To make it work best, you havc a debit card which pulls money out of your business line of credit and you have a specific chequebook which only takes money out of your business line of credit.
You are clearly self employed (illegally of course) in the USA and should be filing US tax returns. You are exempt from income tax and Social Security Federally under Article XIV of the US Canada tax treaty up to Dec 31, 2007, but article XIV was cancelled under the new treaty.
The technical amendments that came out last month deals with the matter on Page 10, Paragraph 3 which adds paragraph 9 to article 5 of the treaty. This seems to say that you are still not taxable Federally in the US if you are not there for more than 183 days. If you are there for more than 183 days more than 50% of your income has to be earned in the US for you to be deemed to have a fixed base or permanent establishment in the USA. (I am looking forward to a comment on this from Andrew, Gary and Dan and any others because this is BRAND NEW STUFF, and I am still not even remotely sure what all the changes mean.
So you should file the US return, report your net earnings and exempt it under article V(9)(a) of the Tax Treaty. New York and Massachysettes and Pennsylvania have state tax returns but Nevada and Florida, do not.
For Canada you will have to file your returns as self employed and also file a GST return. Your GST return will report the US earnigns but there will not be any GST payable. What you do need to do is keep some detailed records and receipts as to income and expenses. Get yourself a Canadian Box number and mail your receipts back to Canda every couple of days so that you:
1. HAVE THEM for Canadian Income Tax audit purposes
AND
2. Do NOT have them in the USA where they could be used against you for possible prostitution charges.
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You may also be interested in this recently published book about a Vancouver Escort. You can find
Illusions: Biography of a High Class Escort
by Ellen Thomsen
at: www.trafford.com/08-0108
Who knows? You might get some tips.
Hope this helps
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Illusions: Biography of a High Class Escort
by Ellen Thomsen
232 pages; quality trade paperback (softcover); catalogue #08-0108; ISBN 1-4251-6966-X; US$19.95, C$19.95, EUR13.63, £10.30
The personal and professional life of an international escort from childhood to high-class seductress. Includes testimonials from male clients, escorting experiences in Japan, ménage-à-trois, her foot fetish web site, and more.
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About the Book
Elysia is a high-class international escort, and in this biography she is open, honest, and often humorous about her chosen profession. She describes her transition from childhood, to street hooker, to working in massage parlors, to her entrepreneurial escorting experiences in Japan, and even into the virtual sex world with her fetish web site. She confesses her dating difficulties in her private, non-business life, including whether or not she tells her personal dates about her professional life in the sex trade. While involved in a married ménage-à-trois, Elysia discovers a truth about herself and the characteristics she admires most in a woman. She shares her torment when her family finds out about her secret profession, and about the client who thinks he can pay her to quit and belong just to him.
Throughout Elysia's narrative she describes personal seduction techniques and expertise on how to fulfil men's fantasies. "Women of the World, you should know." Some of her international business clients are so enchanted by her that they include personal testimonials of their experiences, revealing why they pay so lavishly for her company. This book opens a captivating window into the life, joys and sorrows of a high-class, successful seductress.
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About the Author
Ellen Thomsen was born and raised in California. After attending the University of British Columbia in Vancouver, Canada, she stayed in Canada choosing to raise a family while building a property rental company and writing short stories and poems for children. Surprised when asked by Elysia to write this biography, Ellen informed her that she knew little about the lives of prostitutes, let alone the secret world of a high-class one and was therefore not qualified. Despite this hesitancy, Elysia won her over. Ellen turned that lack of knowledge into an advantage as she discovered this intriguing profession from the eyes of an outsider and asked the fundamentally curious questions we have all wanted to know about women - and men - in the sex trade business.
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This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.
$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,200 would be the same with one rental
$1,300 would be the same with one business no rental
$1,300 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
$1,600 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits no move in or out
$1,700 would be for two people with income from two countries
$3,000 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $200.00 up.
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
A Business for $400 - Rental and business likely $550 to $700
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
Moving in or out of the country or part year earnings in the US will ALWAYS be $900 and up.
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales) are likely $50.00 for the first and $20.00 each after that.
Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable. In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years. We have done several catch-ups where the client has recieved as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund.
This is a guideline not etched in stone. If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.
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