If I don't pay my taxes, and live on cash only...

Say I take my IRA ($200,000) and cash it in. Of course, 20% gets skimmed off the top. If I take the remaining $180K, move away without leaving any forwarding address, and pay for everything in cash, how will the IRS catch me? (and, how long will it take?)

How is that illegal? It’s your money. As long as you don’t get another job or deposit the money (you’d have to pay taxes on the interest) you’re fine and the IRS won’t care. Have fun walking around with $180K, but steer clear of dark allies.

I’m thinking you might never get caught. My sons father hasn’t filed taxes since 1987 when the income deduction order went in. He keeps changing jobs so I can’t deduct his child support from his job and if he got any tax returns they would go to our son so he just doesn’t file. I think he owes me about 50K, and who knows what he owes in back taxes but nothing ever seems to happen.

Like NFlanders said, unless you’re doing something else with the $180K, there’s nothing illegal about what you describe, so you won’t get caught, because you haven’t done anything wrong. If you don’t have any other income, you’re not even required to file a tax return. On the other hand, if you put the money in a bank account, any earnings on it will be reported to the IRS anyway.

Dark allies are bad, to be certain. Watch for dark alleys, too.

Of course you could put the money in a checking account that doesn’t earn interest, and file taxes, and said money still wouldn’t be taxed… and most of it would be FDIC insured.

The IRS only taxes you on INCOME. If you earned the money and already paid the taxes on it, you owe nothing, even if you have millions of dollars stuffed under the mattess.

You would be liable for property taxes if you bought real property with the money, and of course would pay sales taxes in states and localities with sales taxes. But we don’t have a wealth tax in this country so once you have the money there’s nothing to hide.

First, if they take 20% of $200000, you’re left with only $160000, not $180000.

Next, you’re all missing something: He still has to file for the current year because of cashing in the IRA. The 20% withholding is only an estimate. At the end of the year you still have to fill out the forms, count your dependents, etc etc, and see whether you have to pay them a bit more than the $40000 that they withheld, or whether maybe you get some back.

Keeve is right, and the recordkeeper/administrator of his IRA is going to report to the IRS that $200k (taxable) distribution it gave to him.

If the IRS doesn’t find an income tax form from him reporting the same amount, they will come looking for him.

Of course, if he moves and never takes another job that doesn’t pay under the table, he has a good chance of not getting caught, as long as he doesn’t do anything to draw attention to himself (like spending $180000 in cash all at once).

By the way, this is not the place to be discussing how to get away with illegal activities (like avoiding taxes).

And that’s why this is closed.

DrMatrix - General Questions Moderator