Ethics Can Get In The Way Of A Beautiful Evening

I'm a retired IRS agent with a practice helping people with difficult IRS issues. A young woman came to me, referred to me from her employer, because she had a difficult income reporting problem, that had nothing to do with her employer. Non US Source income prior to becoming a US resident taxpayer, passive income in her native country (interest and rents) after she became a US taxpayer that had not been reported. Both issues required different reporting requirements and have different taxable attributes. As neither of these were associated with her employer, they would not pay the fees.

The girl had no ready cash, only her rent money, I had no desire to help on a pro bono basis (gratis). So how to resolve the problem? She offered first, before I even got close to asking. If I helped her with her returns she would provide me with sexual favors (in day to day talk she said I could have sex with her). For her it wasn't any different than when she went out with men for money.

Wait a minute, she does what? goes out with men for money, gets paid? Under the table, unreported income? That's all taxable income and she has to report it and pay taxes on it. Prostitution earnings are not exempt income. Every tax preparer know that. I had to tell her that I couldn't help her, if she had prostitution earnings and wasn't reporting them, then I would be in a pickle. Better to drop her like a hot potato, who know what other tax issues she had and didn't report them, and didn't fess up to them.

Yeah, on the free sex, technically I would have had to report that as payment in kind and give her a 1099 if it was more than 600 bucks worth. Just following the spirit of the law, all income is taxed, from whatever source derived. Isn't Uncle Sam a beneficial soul.