Paying taxes as a tattoo artist

Submitted by ofmiceandmermaids t3_z8xe89 in personalfinance

I'm not sure if this is the correct sub to ask this, if it's not could someone direct me to the correct one?

My fiance is currently employed as a tattoo artist. He's paid at the end of every day primarily in cash and sometimes through Venmo. He does not receive paystubs, a W-2 or 1099. He's never actually filed taxes before and he's 29 tattooing for 11 years.

We are looking to buy a house after we get married in the spring but I know for him to be on the title he has to prove his income. What is the best way to go about this?

I'm currently in sales and usually my banks will take two years of bank statements but he doesn't even have a bank account.

How do we best go about creating a paper trail for him so he can file taxes and be able to finance purchases in the future? We could survive off of just my income and credit but he doesn't want to always have to rely on me.

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93195 t1_iydspx7 wrote

So your fiancé owes 11 years of back taxes…..

The correct/legal thing to have done was report income, filing yearly and sending in estimated taxes quarterly.

He’s got 11 years to catch up on, although the statute of limitations may have passed on some of that.

Getting a mortgage will be difficult (impossible) until his tax problem is resolved, as no bank will touch someone with that much unknown tax liability, and he has no tax returns to prove income.

Best action is to contact a tax lawyer.

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ofmiceandmermaids OP t1_iydtrf3 wrote

Thank you that makes since. He was in and out of the legal system until about 2019, but has been working steadily sense. It's honestly a huge mess so a lawyer makes sense. I'm new to all this so thank you for your help.

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RockAndRollerGuy t1_iye965x wrote

The 10-year Statute of Limitations doesn't apply if you willfully failed to file a tax return. The clock starts ticking on the later of the date of an IRS assessment or when the tax return is filed. 11 years of back taxes are rightfully owed here.

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MentallyMusing t1_iye03g5 wrote

It's been awhile since I applied for a mortgage but typically they want 6 months proof of income. Your best bet to find a structure for taxes is to look at what hairdressers who rent a chair from the salon have to do (since they also get tips) the owner of the salon applies differently for taxes and is legally required to keep track of contractors working out of their shop

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ofmiceandmermaids OP t1_iye0xo5 wrote

I actually use to be a hairdresser so I'm familiar with that. That's very helpful thank you.

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MentallyMusing t1_iyelf4i wrote

No problem! Not all business owners are good about keeping their records but if they get audited the shit usually rolls downhill and everyone is on their own against the IRS. The IRS doesn't care what you were told or didn't know they'll take everything leaving you with $50 out of your paycheck if they attached you for future earnings (from your next employment checks) until you're paid up in full. In Massachusetts anyway for Federal and State taxes which of course are separate

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ofmiceandmermaids OP t1_iyelobv wrote

Yeah from what he's said the shop he works for under reports so it's a mess from the top down. But everyone here has been super helpful. It's going to take some work but I think I have a good plan forming.

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TalkKatt t1_iye4zsg wrote

After this, get a CPA. You need to keep taxes on the straight and narrow. Plus no taxes = no social security. You might think you won’t need it, but life changes.

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ofmiceandmermaids OP t1_iye5b62 wrote

That's what I've told him. I already have investments, a 401k, and an IRA. But he can't always count on me.

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[deleted] t1_iyee85u wrote

[removed]

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ofmiceandmermaids OP t1_iyef8gn wrote

I know it's wild I was shocked too. And when we first got together he was basically spending it as fast as it came in. But we got that under control. But he has no debit card or credit card. He has a Venmo account and a debit card linked to that but that's it. I just found out he keeps the money hidden all over his house. Funny enough for a stretch of years he was in and out of jail in his early 20s so we don't have to worry about taxes there. Also from what I gather he doesn't even know if he has a credit score. The place he rents now he pays his landlord cash for. We definitely need to sort this out before I legally tie myself to him in any way. I've spent too long build my finances up. I love him but no one ever taught him any of this and he's very lost.

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SmallBoxInAnotherBox t1_iyeg6l6 wrote

get him hooked on finances and saving and the security you feel from a financial saftey net and itll all work out. this tax thing is interesting thats square one then get him a real bank account. there is a financial flowchart in the wiki somewhere he should conquer step by step.

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ofmiceandmermaids OP t1_iyegr3j wrote

He told me that now that I'm in the picture he's serious about saving and setting up our future. I showed him everything I have set up and now he wants it too. The tax thing surprised me. I asked him the same question ten different ways to make sure I was understanding right. I knew that him not having filed taxes for 11 years was bad, but I had no idea where to even start. I've gotten some good advice though and we have more research to do now that I have a direction. I'll have to check out the flowchart. Thank you!

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peter303_ t1_iyf23bs wrote

Note, the threshold for 1099 reporting of internet cash activity was lowered from $20,000 a year to $600 a year, starting for the 2022 tax year. Venmo's FAQ says that is for goods and services. Splitting a restaurant check or a utility payment should be marked personal instead.

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Triscuitmeniscus t1_iydvnvs wrote

>We are looking to buy a house after we get married in the spring but I know for him to be on the title he has to prove his income.

This isn't true. He can still be listed on the title, his income just won't count when you're applying for mortgages.

>How do we best go about creating a paper trail for him so he can file taxes and be able to finance purchases in the future?

Have him file his taxes for the previous two years, and start paying taxes from here on out. Google "how to file taxes without w2" to get started on that journey. Hiring a professional to help with this is probably a good idea.

>...but he doesn't even have a bank account.

How does he get cash from Venmo with no bank account? How does he pay for the phone he has the Venmo app without one? Does he use a credit card and mail them cash every month? Regardless, have him start an account today. Being unbanked is a huge hindrance, as he's now discovering.

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ofmiceandmermaids OP t1_iydwg6s wrote

Thank you for your help. In New to all this as I've always rented. Now that I'm looking at everything we are going to need professional help. He doesn't even know how much he made last year. And he has a venmo debit card and a prepaid phone. He's learning a lot quickly since I've started riding him on all this. He's just in such a big mess I had no idea where to start. He's so use to paying cash for everything. And we are about to get him an account. I was looking into the local credit unions. I didn't realize how bad everything was until he proposed and I sat him down to start talking finances.

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Triscuitmeniscus t1_iyf0ypv wrote

At least you two have the sense to sit down and have these conversations early on in your engagement and fix them. You wouldn't believe how many people post on here blindsided by their spouses horrible financial situation after 10 years of marriage.

Opening an account and getting him banked will be huge. From his perspective it shouldn't change much: he can still pay with cash, it will just come from a bank card instead of a Venmo card. And the good news about having no record of his income is... there's no record of his income. As long as he pays what he owes from here on out and follows a tax professional's advise he should be fine. The IRS isn't going to start investigating how much people paid for their tattoos any time soon.

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ofmiceandmermaids OP t1_iyf1ph8 wrote

Honestly that makes me feel a lot better so thank you. And we will be getting him a bank account as soon as he gets back from his convention. I've been researching the local banks and credit unions so I have it narrowed down. I really want him to be able to see how much he actually spends because it's ridiculous what he can blow through without even realizing it. But I told him this was a conversation that we needed to have and take seriously if we are going to have a future. But I'll be researching professionals too.

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MelzyMely t1_iydxvdw wrote

I think you have an idea of how to go about this, but just before you guys get married, really dig deep into how much this will affect you financially after you’re married. If you file jointly to get tax benefits as a married couple, you could’ve potentially be responsible for his previous tax years. I’m not entirely sure though. Getting married is a financial decision, not just a romantic one. You’ve been following through with growing financially, but your partner isn’t on that level yet. Make sure you’re protecting yourself

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ofmiceandmermaids OP t1_iydyf1y wrote

That's what I was afraid of. I just wasn't sure where to start but I've gotten some good answers. I'm glad people have been so helpful. And I've been working hard for years to get myself set financially so I want him to be able to do the same. He's very willing to do what it takes he's just lost.

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MelzyMely t1_iydyo20 wrote

He will figure it out and he has a good woman there helping him figure it out. I think it’s really beautiful and shows a good partnership. I just had to add in the “make sure you’re protecting yourself” part because I’ve been through a divorce where I was financially having to build my partner up as well. It wasn’t a messy divorce but we made a lot of poor spending choices because I wanted him to have a good life, etc.

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ofmiceandmermaids OP t1_iydyt70 wrote

Thank you! He's been very open and honest so that's helpful. It's just going to take work.

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sephiroth3650 t1_iye0dqg wrote

Your partner proves his income by filing taxes and formally claiming the income. If he's doing everything under the table, he can't really prove anything.

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ofmiceandmermaids OP t1_iye127q wrote

I know. We are trying to figure out how to properly prove his income.

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sephiroth3650 t1_iye355v wrote

Your partner proves his income by filing taxes and formally claiming the income. Consult an accountant if you're unclear on the best way for him to file taxes at this point.

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ofmiceandmermaids OP t1_iye3iz8 wrote

I know now I need an accountant. He said it's always been hard to keep up with because he gets random amounts of cash daily. We are trying to figure out how to properly keep records of what he makes.

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