Taxable Talk

I’ve made plenty of posts on strip clubs and how some owners of these clubs manage to “forget” to report all of their cash income. Well, I’m heading to Las Vegas next week for the annual California Society of Enrolled Agents’ SuperSeminar. There’s a battle shaping up in Las Vegas: the IRS versus strip clubs, doormen, and taxi drivers.

There are many strip clubs in Las Vegas. Suppose you own one of these clubs; how could you draw more customers? While advertising, signage, and word-of-mouth will clearly help, there are obvious limits to this given the nature of your business. So strip clubs pay out “finders’ fees” to doormen and taxi drivers.

Of course, that cash being paid out is taxable (all income is taxable unless exempted by Congress). But how much of it actually gets reported? If you guessed “about zero,” you’d be correct. And the IRS isn’t happy about this.

Doug Elfman of the Las Vegas Review-Journal reported on this last week. The IRS discovered how much cash was being thrown around (at least $100 per person brought to a club) and read club owners the riot act: Start following the law and issue 1099s or find yourselves at ClubFed.

Mr. Elfman noted that there’s one industry in Nevada that scrupulously follows the law: brothels. The oldest profession in the world knows to be smart with the IRS. We’ll see if the clubs follow suit or end up in trouble with the IRS.

Tags: StripClubs

This entry was posted on Sunday, May 2nd, 2010 at 8:21 pm and is filed under IRS, Nevada. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.