Mary Blackburn aged 32, is a single parent who resides at 645 East 23 Street Brooklyn NY,

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Question:

Mary Blackburn aged 32, is a single parent who resides at 645 East 23 Street Brooklyn NY, 11223. Her daughters Amara and Zena, aged 12 and 14 both attend public schools and live with her. Mary works only on Thursday, Friday and Saturday nights as an exotic dancer at Classy Dholls. Her employment arrangement at Classy Dholls specifies that she must remit 20% of all earnings to her employer for the opportunity to work in this establishment. Her gross income weekly is $1,500. Apart from her earnings at Classy Dholls, her family receives $350 weekly from the government assistance program, WIC.

Once when asked if she files taxes, she replied, “the government collects their fair share of taxes from the rich.” She stated that maybe if she had a full time “legit” job, she would be willing to pay her share of taxes, since her employer would be taking it out anyway. Mary believes that since her employment is illegal and most of the money she earns at Classy Dholls is from “happy endings””, and” private dances”, paying taxes is like “snitching” on herself to the government.

Classy Dholls is a legitimate gentleman’s club. However, prostitution and other illegal activities are their main stream of revenue. Employees are not considered employees but rather independent contractors. The employer’s reason for this classification is to shift all employees’ tax responsibility to each individual and not to his establishment.

Assume these other facts:
• Mary worked 30 weeks during 2018 at Classy Dholls and apart from the 20% commission fees, she incurred these expenses: Traveling - 2,000; Clothing – 3,500; hair care and other cosmetic expenses – 3,200; Misc. expenses – 1,800. Assume all expenses listed above are qualified expenses for tax purposes.

• Ms. Blackburn enjoys gambling and considers herself to be the “Black-Jack Doctor”. During 2019, she won $2,400 and incurred losses of $3,000. Her net gambling losses were $1,800. After her summer winnings, she had been on a consistent losing streak!

• During Spring break, Mary performed at a private bachelor party. She was paid $550 for the night. Her customers were so happy with her services; she received $250 in tips.

• Assume that her daughters met all the requirements to be her qualified dependents.

• During the summer, Mary had borrowed $2,000 from Mike the “loan shark,” and she repaid him $2,600.

• Mary is considered legally blind.

Instructions:

Compute Mary’s Taxable Income.