I see ads on TV constantly now from the Heritage Foundation and others urging us to call our congress-people and urge them to stop the IRS from snooping in our bank accounts.
The IRS isn’t going to be asking questions about the $150 that was deposited from Venmo when you sold your old sofa set. They might ask why you have $50,000 in transfers into your account in addition to your paycheck but you have reported not “Other Income” on your tax return. The big tax cheats are the ones the Heritage Foundation and NFIB are looking out for, not your occasional yard saler. Now if you are going to yard sales every weekend and reselling vinyl records and vintage toys for a profit of tens of thousands a year, you might get questions, but then you are, you know, dealing with thousands of dollars.
This is the same political tactic as frightening millions of people who never saw a million dollars in their lives, that when the Estate Tax exemption is dropped from $10M to $6M, the government will take their house when they die.
Is there any documented instance of the IRS or any state DOR going after side-gig income in the hundreds?
Car dealers get into trouble all the time for helping customers avoid the reporting requirements on cash purchases by Structuring (the actual name of the offence) the payments into amounts of less than $10,000 each. They don’t need to have the “revenuers on speed dial”. At least in the US there are reporting requirements for large cash transactions, and they file them routinely.
In Australia you don’t send the receipts to the tax office you just must have them in case you are audited. By saying receipts are not required the tax office is basically saying you are free to cheat because they won’t ask for receipts even if they audit you.
Is that correct? What if someone sells an item for a lower price than what they bought it? Maybe the market for that item has dropped, maybe they payed too much when they bought it, maybe they need quick cash and have to sell at below market value, whatever the case may be. Would that still be considered income?
If you report less income from Uber or another gig company than you actually earned, the IRS computers will eventually catch the discrepancy (because the companies report all the payments above some threshold to the IRS with the associated SSNs) and they will send you a letter outlining how much additional tax you own, even if it’s only in the hundreds.
I accept your word that such is the case. I don’t dispute it. But I have no personal knowledge of it, because I understand that world to be stocks and bonds and banks and such, and I am not part of that world. This thread, for example, does discuss employment and salary and taxes, but I don’t think that’s the same thing.
I think the great majority of posters here remember the roman number M from school, but the only place they see it is on copyright notices. In regular life, for most people here in the computer age, k is for kilo, and m is for mega.
Our tax preparer has several different levels of service. We just have the basic year end service but they have offered an “enhanced “ service that they look for ways to lower our tax burden. Instead of a standard deduction they would find other legal deductions. Much more paperwork on both ours and their part so more cost. Just penciling it out it would be close to a wash on what we would save compared to the cost of the upgraded service. They said some of their clients save thousands, if not tens of thousands in taxes by doing the extra paperwork. Of course these people have a much larger financial situation than us.
In response to the cash jobs, my former mechanic (now retired) would run a continuous oil change special. Every oil change was based on 6 quarts of oil. If your car takes 4 or 5 quarts, he “gained” 1 or 2 quarts. If it took 7 or more you paid for the extra quarts. If a customer paid cash he would use these “extra” quarts for the oil change and pocket the money. The number of oil changes done (on the books) vs. inventory would match close enough not to raise suspicion.
From what I’ve heard, the IRS will look at your lifestyle and if they don’t think it makes sense they can start an investigation - like according to your paystubs you make $1500 per month but you have a mortgage on a $500,000 home.
It’s not just an American thing. The Canada Revenue Agency likes to publish lists of people convicted of tax fraud. Virtually ALL of them, like 99 percent, are small independent businesses. None are big ones or rich people. The government makes no effort to enforce tax laws on such parties.
Or he buys oil from Walmart and dumps them in the bin. That is what one independent shop was doing when I worked for a discount store. Whenever we had a special on Valvoline he would come in and buy dozens of cases and pay cash, like $300-400 in cash. He would also buy tons of our “own brand” filters and windshield wiper refills of various sizes when those were on sales.
He was on the same shopping center. He would have some guy opening and dumping in hundreds of bottles of oil into the drums connected to the hose. That was back in the late 1980s when a lot more business was done in cash. He must have been taking in thousands of dollars a month unrecorded if indeed he was using the oil and supplies purchased for cash to provide unrecorded cash-paid services to customers.
I see this thread has some replies, but my first thought was “Well, I know who doesn’t own a home in San Antonio”, lol, because all contractors prefer working with cash, the smaller the contractor, the more eager they are for it. And has been noticed, for those contractors who have to purchase supplies, they can be tracked. But your house painters? The guy who cleans your carpet? The maid? There are no large purchases to track, and my God, here in San Antonio have your niece buy the paint if you’re worried about the IRS descending on Southtown.
And I’m not going to say anything as to their reasons, but it does make some… forms… of… bookkeeping… easier, yes.
Lastly, in my families time among the petit bourgeois, there were more ways to deduct taxes and have the business pay for shit and just put as much of your personal expenses on the business than you’ll ever realize. When my father was thinking about selling the distribution business, every person we talked to mentioned that the first thing they needed to do was recast the books - i.e., remove the boat from the books. Remove the cars. Remove the lodging. Remove the overpaid owners, and raise the wages of the current employees (the initial assumption is that everyone in a family business, other than the owners, were underpaid. Which was probably correct.)
Effectively, they all told us that they knew, understood, and expected, the family business to be as much of a money laundering machine as a real business, and they could only figure how much of it was a real business by looking at the books and getting rid of the expected money laundering.
lol, let’s just say the efforts never went past these initial meetings.
When my dad started delivering phone books in 1978, 79, each of us four kids would have equal annual 1099 earnings so we could avoid the higher tax rates. There was literally no secrecy about this, either in the family or at the distributor. “Hey, Dad, surely this check is mine, right?” So Dad may have made $20k delivering phone books, but the declared amount was spread among him and his four kids, so we had $3,400 each in income (assuming $600 deduction, which may have been lower in 1978, not that I’m going to look it up. )
ETA: I looked it up. Well, not the deduction, but the tax savings:
$20k would have put him in the 34% tax bracket, $6,596 in taxes.
$3,400 is 16%, $544 each, or $2,720 in tax.
$3,876 in tax ‘savings’.
For a struggling single father with four kids in 1978, it’s an easy decision to make.
In the 80s, my friend’s father did something similar. He owned a small business and put my friend on the payroll. The money that he sent him every month for school expenses was a business write off but low enough that my friend paid very little taxes. My friend did help out around the shop on occasion but still…
^In the 90s and early 00s instead of giving my kids an allowance, I put them on payroll at work. If they did absolutely zero “chores” (helping me out at work) they received a baseline allowance but in the form of a paycheck. If they exceeded the minimum, their pay could double.
For my daughter this worked well. She loved helping out at work and felt great about “earning” her allowance. My son saw right through my scheme. He took the minimum with zero effort and laughed at his sister.
Due to the cyclical nature of the trades most tradespeople I know have 5-10k cash basically sitting under their mattresses. You get stiffed, someone’s check doesn’t clear that month, you couldn’t get the county inspection for 6 weeks, so no pay… The tax advantage is good but many of these people are turning over millions of dollars to make 120k a year. When everything is on the books it can be hard to “pay yourself” because of all the incoming and outgoing expenses. Last months job hasn’t paid, you need to order 50k worth of materials for next months job. You have an invoice for a $4,500 fuel bill. The Bobcat need 6k in tires. At the end of the year you will have earned 120k in profit but that doesn’t help you in January when your kid needs $280 for basketball. So somebody pays you 5k for a pretty off the books job and that’s your “petty cash” to ride out the year. There are better and more legal ways but the real advantage is that it just doesn’t even enter the system.
My point is that millions of people are skirting there responsible to pay there fair share of taxes and are saying screw the book full of deductions that are there for there business and not paying anything tax wise on the cash end of their dealings. And who gets stuck paying for the freedom of the well to do ? The working stiffs, the little guy pays ! The Biden 600.00 rule will make it more challenging.
There was a controversy a few years ago where guys were reporting women who made tens of thousands a dollar a week/month on Twitch/OnlyFans to the IRS “for fun” because a great number of them admitted/bragged online about not reporting their income.
Things got even more confused when some “experts” defending the women claimed if you made less than $20,000 from “donations” only you didn’t need to claim them in taxes.
When I sold off some of my late spouse’s possessions the income was sufficiently large that my accountant said to declare it. But he also said to figure out the initial cost, by which means I could show a profit or loss. From my viewpoint, it was several thousand dollars in my bank account, but from an accounting/tax point of view, once the initial cost was taken into account, it was break-even or just a couple hundred in profit. All legal, but that’s the sort of advice I pay my accountant to give me.
So yes, it’s considered income, unless you can show you sold those items at cost or at a loss…
I believe the cut off is $700, or at least in that ballpark. Don’t quote me on that, I’m not an accountant. When it comes to actual reporting I ask my accountant.
)