Do You Report All Your Income?

Posted by Madison

It came to my attention recently that one of the service providers of our family does not report all of his or her income. I’ve always “known about it” in a roundabout way, but it was actually stated to me directly. I’m in a quandary about what to do…. and I’m also mad about it.

The Tax Cheat

I suggested that instead of paying this person, we just set up an automatic transfer from my account regularly, saving me the hassle of writing a check each week. The person told me that they definitely did not want to do that because then there would be a record of the money and they would have to report it. WHAT??!!

I’ve been asking around to see how common it is and it appears that it’s pretty common for this service. So, unfortunately, it isn’t that easy for me to replace this person with another one that will report their income. It actually seems to be a widespread, and very disturbing, problem. I’m guessing that this is common with many industries that pay in tips too.

We Pay Taxes, Why Don’t You?

I’m fuming. Not only at the individual, but at all the people who don’t think that they have to report their income to the IRS. Why on earth would you be entitled to not pay tax, when millions of other Americans have to? I can only assume that my taxes are higher to account for all of those who do not pay their fair share.

When I work, I work my butt off on stuff. We’ve been successful in launching our new company and we reported every single dollar of income. Why? Because it’s the right thing to do. If you choose to live in America where you can earn money you’re obligated to pay tax on that income.

How to Report to the IRS

Do you know someone that is not paying tax? Here are directions on how to rat out tax cheats. Rewards can be up to 30% of recovered unpaid taxes.

I haven’t decided how to handle this issue. Would you report a tax cheat? What about an innocent spouse?

Tell Me Why

I’d love to hear people’s arguments why you think you don’t have to pay taxes on your earned income and I do. I’m not saying that you shouldn’t take advantage of fun tax deductions and other ways to cut down on taxes that are within the law. I’m against under and non reporting of earned income.

I’m also not arguing the tax law here, that is done elsewhere: 66% Of American Corporations Pay Zero Federal Income Tax. I’m more focused on figuring out what the mentality is of people who feel they don’t have to report their income.

Do you report all your income?

(Although, do me a favor and post somewhat anonymously if you are going to tell me that you don’t… I don’t need a bigger problem on my conscience!)



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Comments to Do You Report All Your Income?

  1. I don’t think anyone is going to tell you that they don’t pay taxes since you put the “tax cheat” link on there, even if anonymous. Nothing is anonymous on the web! :-)

    It happens more often than anyone likes to think, but hey – wealthy people don’t like paying taxes and try to find places to hide their money, so it’s not just the “service” people who don’t pay. What’s the difference? The service people are hiding a few thousand at most. The wealthy hide way more than that…

    Davod

  2. Ah. A couple things. First – And I have yet to confirm this before I decide to stop paying taxes but one reason why I’m leaning towards that is because I have heard (supposedly from former IRS workers) that there actually IS NO “LAW” that requires people to pay income taxes. Not only that – but some argue that it is unconstitutional and that the 1st and 5th amendment eliminate an obligation to file a return. Granted – I haven’t fully looked into it and will wait for someone else to confirm or deny this, but:

    Second: For some – it could be a political statement. Just recently, and I’m sure you’re very aware, Congress passed a 850 BILLION dollar bailout package. It was passed almost instantly and without sufficient time for all congressmen and women to review it’s hundreds of pages and consult with their constituents. That is taxation without representation or even at least consultation. It’s stupid actions like this that make me lose faith in the whole process and if I don’t want my tax dollars to line the pockets of irresponsible and greedy bankers – then I wont pay taxes. I don’t want my money to go towards an illegal occupation in the Middle East. I don’t want to pay for a failing war on drugs. I don’t want to pay for an insulting wall/fence on our border. I want money to go towards education, health care, poverty relief, scientific research and on and on – programs that if given priority would eliminate the need for the others above and cost far less. Beyond that – not long ago I was also under 18 years of age and paying taxes but unable to vote for how they’re spent. That’s unfair.

    The whole system is muddied and I won’t go into it here but don’t assume it’s because some people are greedy/lazy – for some it was an intellectual decision and a warranted protest. If their votes don’t mean anything – their dollars do.

    Jeremy Keith Hammond

  3. @ Davod: Right! I don’t want to exclude the wealthy. My question is to anyone who doesn’t pay taxes, at any income level.

    Jeremy: Very interesting perspective. I would have never really thought of paying taxes or not paying taxes as a political statement.

    I’ll send a note to my contact at the IRS and see about the absence of a law to pay tax… although people have gone to jail for tax evasion, so I’m thinking there is probably something on the books…

    Madison

    • The courts have struck down the idea that there is no law requiring you to pay income taxes. It is considered a frivolous argument and a defendant is actually penalized for every making the argument. There is in fact a law granting Congress the authority to levy an income tax: the 16th Amendment to the U.S. Constitution.

      I happened upon this article because I’m in the same predicament. I volunteer for a nonprofit and recently had a vendor tell us that he wanted more than his quote after we requesting a W-9 because he gave us a discount on his services because he didn’t plan to report all of his income. I couldn’t believe that someone was so open about cheating on their taxes! I said this to his liaison, who could only reply, “I wish you told us about needing a W-9 earlier in the process.” I couldn’t believe it! The non-profit is a business. We are honest and we don’t ignore or disregard laws and regulations. Would a contractor give you a discount because he planned not to obtain a required building permit? How is this any different? I pay all my taxes and claim every penny. As a CPA, it’s my job to help clients reduce their taxes by all legal means possible, but omitting income? I don’t know if I should report him or not.

      Sarah

  4. Yes, I do report all of my income to the IRS.

    My first reaction is that it’s not your business if someone else reports income or doesn’t, as long as *you* do what’s right. I’m sure the rebuttal is that it’s the business of every American who *does* report income, but that sits odd with me.

    Jen

  5. @Madison – That would be great, though I’m sure you wont find too many IRS agents who know or will admit to it. Like I said – I can’t confirm it.

    And people get punished for lots of things that are dumb – like the renter who pays his rent on time every month but is evicted because his landlord didn’t use the money to pay for the mortgage on the property. (Fortunately you have police like this guy: http://www.suntimes.com/news/o.....09.article who show up occasionally)

    Now with habeas corpus out the door in the patriot act – you don’t have to do anything unlawful to be arrested. The fact that people get arrested for it doesn’t necessarily mean that it’s unlawful – it just reminds us who police work for.

    I look forward to the response from your IRS friend. We’ll probably find that it was just some conspiracy theory – but it’s interesting nonetheless and people do use it as an excuse not to pay.

    For me (and don’t bother reporting me because I still pay them – for now) it would be a political statement about how our taxes are used not whether or not the government has the right to take it.

    Jeremy Keith Hammond

  6. @ Jeremy: A reader emailed me something that might help with the tax law question: Statutory Myths & Constitutional Myths from Income Tax: Voluntary or Mandatory? written by Jonathan R. Siegel, a law professor at George Washington University Law School.

    Here’s a quote from his ‘who this page is for’:

    “This page is for people who have heard or read arguments that the federal income tax system is “optional” or “voluntary,” and who are not certain of what to do. It’s for people who find the arguments sufficiently persuasive or tempting that they are actually thinking of ceasing to pay taxes.

    I hope that by explaining in straightforward terms where the obligation to pay taxes comes from, and what is wrong with the arguments to the contrary, this page can stop people from making a big mistake that will cost them a lot of time, trouble, and money and that could land them in jail.”

    Madison

  7. @ Madison – that is a wonderfully organized and informative link. Thank you.

    Jeremy Keith Hammond

  8. I wanted to share this old story from Get Rich Slowly about a politically motivated individual who pays no taxes.

    Of course, he does it legally. But it’s still interesting.

    http://www.getrichslowly.org/b.....-10-a-day/

    Brian

  9. I do pay my taxes and wish everyone would because it hurts us all for them not to. I wish I had your link earlier, but found the info I needed at IRS.gov. It took me years to get up the nerve to turn in a former employer who chose not to pay the federal medicare and social security taxes. This hurts us all because we have to pay the taxes these people don’t and hurts hundreds of us personally with reduced social security benefits. And no, I don’t want to get into whether SS is good or bad. It affected over nine years for me and many more for others.

    Nancy

  10. I do pay mine. Not because I agree with what the government is spending ‘my’ money on. Because there are sooooooo many things that I would change if I could. But why should I condemn ‘them’ for doing something wrong and then do the same myself!??!!? How can I stand and point my finger at the government, if I am breaking the law myself?!?! Yes, there are malicious; greedy people….. but I don’t want to be the same as them. So I do whats right. and leave them to their own consciouses. (yes, it is arguable whether or not they have one.)
    I am for the adage “Give unto Cesar what is Cesar’s!”

    I look at it the same as taking a convicted serial rapist out back and shooting him point blank. Does it feel good? of course. but does my wrong, make his wrong right!?!?! nope. now we are both just plain wrong. (no, I’m not talking about self defense.)

    anyway, thats just my opinion on the subject.

    And I agree with Davod. I also don’t think anyone would tell you that they don’t pay taxes. lol

    Alexia

  11. @Alexia : Our author here certainly touches a sensitive issue and I’ll do my best not to perpetuate a discussion that could easily get out of hand.

    “It’s no measure of health to be well adjusted to a sick society.” -Jiddu Krishnamurti

    Breaking the law to punish the gov because you don’t approve of what they’re doing isn’t hypocritical.

    Thomas Jefferson wrote in our Declaration of Independence that it is a human right to change or abolish one’s government if it doesn’t serve the best interest of the public.

    We have the resources to provide health care to all, improve education, and switch from destructive/limited energy sources to abundant, renewable and clean ones. The bailout was enough to put every high-schooler through a 4 year college. But we don’t. Instead we spend billions of dollars killing millions of people to “spread democracy” Billions of dollars to fight a futile war on drugs where the laymen can grow what they want in their basement or back yard. We spend billions of dollars on bailouts to pay huge corporations because they pay millions to our elected officials to… get them reelected and vote for more bailouts.

    You gotta remember, laws are part of established systems (Now… I’m not advocating anarchy… far from it. We just need something different.) but everything in our universe from the incredibly simple to huge and complex systems emerge, change and eventually disappear. Established systems resist inevitable change – No way is it ever going to be “legal” to evade taxes – but all things need to change. Just like how we needed to secede from Britain because it no longer served our public good.

    Of course – if you agree with what goes on in society – pay the taxes and follow the laws. You might even think that from within the system you can change it (good luck and god bless – I suggest you read up on the philosophies and fundamentals behind capitalism before you try) but if you’re treated unfairly in the political/economic spectrum and you know it – you have the right to resist and oppose it.

    I strongly oppose the war in Iraq and the economic systems we’ve established to take advantage of developing countries (and our own people). But I’ll admit, I don’t have the balls to stand up to it. (I wish I did.) So I’m not going to blame anyone who wants to feed into the system with their dollars and votes – but I think they should do it while at least knowing the consequences.

    The mob mentality a couple responders have exhibited is dangerous. Don’t pay taxes because it’s the norm. Don’t do it just because everyone else does and don’t force people to do it just because you’re forced to. Duty is a dangerous word because it can be a great virtue and everyone SHOULD dutifully support their community – but something isn’t your duty because the word is flailed about. Understand why you pay taxes, who really controls it and how it’s spent.

    **disclaimer: To resist and oppose is not synonymous with military revolution. That just worked for the forefathers. I’m a pacifict and choose to oppose the system by boycotte. I am NOT remotely implying we should revolt and stuff despite how volatile I may have come across in my passion above.

    Jeremy Keith Hammond

  12. @ Jeremy.

    I agree with you (up to a point). but most of all I am a firm believer in the ‘agree to disagree’ mentality. Every one has the right to their opinion. Thank God for democracy, right? lol

    And I definitely try to not ‘feed into the system’ with my votes. As much as is possible, because (with out starting another topic) we really only KNOW what they tell us.

    But my money? If I were to boycott and not pay taxes, on my salary (well, my hubby’s because I stay at home with my babies)… truthfully my family would be the only one’s to lose. :) If I had the resources of Trump then it may be worth it. And I guess (in your words) I don’t have the balls either. lol

    Seriously, I don’t find myself content in the current governmental situation. but I’m not naive enough to think that my tax dollars can change anyone….. at least not mine alone. (No I’m not calling for everyone to stop paying taxes!) So, why would I willingly put my children in danger (of not having mommy and daddy with them) by breaking the law. Instead, I write letters to my officials (since I do pay taxes and therefore do pay their wages!) and I involve my children…. I hope to give them the example, of not only doing whats right (paying your taxes) but also of standing up to the government in a polite and respectful way!

    I hope that makes sense, as I’m not nearly as articulate as you are. (no I’m not trying to be sarcastic. I’m just giving credit where credit is due!)

    Alexia

    Alexia

  13. @ Alexia : Of course it makes sense :-D and I don’t think you’re doing anything “wrong.” I don’t even know or would try to dictate what I think you should do for your children either. I would be a huge jerk.

    When I say boycotte – I don’t mean I don’t pay taxes. I avoid certain banks owned by certain companies and families that spend millions on lobbyists that ambush our congressmen and women in the halls of our capital. I’m in the process of moving my funds to locally/democratically run credit unions. I also vote for politicians who aren’t swayed by those lobbyists (not that they win often.)

    And thank you for calling me articulate. It must be the beauty of the internet because if you met me in real life I would sound like a stuttering idiot desperately failing to get my message across and over my tongue.

    Jeremy Keith Hammond

  14. The system is broken. Not everyone pays taxes, ask Warren Buffet. He pays less in tax, percentage wise, than his secretary.

    Would you ask the 12 year old kid that mows your lawn for cash to report his income? Just curious.

    No Debt Plan

  15. It would be very easy not to report a lot of web income – especially some of the income that originates from overseas companies. But I would rather follow the law and pay my fair share of taxes. If everyone paid the taxes they owed (and this includes all workers who receive cash payment instead of a paycheck from a legitimate payroll), our counties, states, and national government would have more money to function properly.

    Reporting everything keeps me on the right side of the law and lets me sleep well at night.

    Patrick

  16. I am willing to bet that your “service provider” is actually your babysitter.

    I am a full-time working professional who reports all of my income. In addition, I will also be going back to school to get my nursing degree. I might also get laid off from my job as my company is not doing well.

    As a 25 year old with lots of child care experience under my belt, something that helps me sleep at night if I get laid off or need to supplement unemployment income is the idea of babysitting under-the-table.

    It’s not necessarily right, but as a struggling young woman who is desperately trying to save every penny she can for school (and as required by law in Mass, will be forced to pay $300+ for my employer-provided medical insurance during unemployemnt) I like the idea that I can make good money babysitting and that it won’t be reported to the IRS.

    This is very common for childcare providers.

    Also, it isn’t your business. You can only be your own moral/ethical police and it is not your job to police others. Most people in these positions (childcare/waitress) try to get every penny they can out of their job because a) the jobs are incredibly challenging abd b) you can’t very well make a good living off of either.

    Just my 2 cents.

    Melissa B.

  17. @Patrick: “… our counties, states, and national government would have more money to function properly.”

    You mean more money to throw away on senseless projects and bailouts? :)

    No Debt Plan

    • Thank You! They can’t be trusted with ANYTHING!

      Jim

  18. Here’s some information on why some don’t pay taxes. A documentary from the producer of “Trading Places”. http://www.youtube.com/watch?v=3ueEfRXZCVA

    Bobby

  19. My hair stylist once told me that she didn’t report her tips (altho she did report her other income). On the other hand, she was a single mom and she was specifically putting her tip money towards things for her baby instead of getting food stamps or other government support that she could have gotten. That is the only time I’ve thought someone had a decent reason for not reporting it.

    Unlike some other posters, I do believe it is your business, just like supporting any business is your business! If you like the ethics of a company, you buy from them. If you don’t like the ethics of a company, you can avoid buying from them. I totally believe it’s my business to NOT buy from Wal-Mart and TO BUY from local stores. (And to buy fair trade chocolate.) So that’s what I do (or at least try to. Haven’t put a foot in a WalMart in at least 8 years so far. Not quite as good about buying locally in general but working on it).

    When I hear people complain about paying taxes, I always speak up saying that I don’t mind taxes. I appreciate the support my special needs sisters get. I like the road in front of my house and the interstate highway system. I like free education. And so on. Sure, there are things I don’t like that taxes pay for, but I like to imagine my dollars go just to the stuff I like ;-)

    I hope you can find someone to fill this job who is ethical.

    I should note, I’m so ethical about paying my taxes that I try to overestimate the amount of stuff I’ve bought online (w/o paying sales tax) just in case I forgot something so that I pay the appropriate sales tax to my state. Most people just skip that section of the taxes…..

    AnnMarie

  20. When I hired a nanny for my kids, I made it clear that I was going to report the expenses on my income taxes as a deduction. I treated the nanny as an employee. Got the I-9. Paid Social Security… all that stuff. 2 of my interviews ended there.

    My cousin paid her nanny “under the table.” She told me that there were no nannies in the area she lived in who would accept my stance on the matter and that she had no choice. A year later, they discovered that the nanny was stealing from them. I insisted that she file a police report so that it wouldn’t happen to another family. She couldn’t/wouldn’t because she had been paying the nanny under the table and would have gotten into legal trouble herself.

    My ex-nanny was wonderful and is now a supervisor in the county foster care program. Hers is probably scamming another family at the taxpayers expense.

    Christina

  21. I do not pay taxes, despite having a relatively substantial income for someone my age.

    I will pay taxes as soon as I turn 18 and can vote.

    In my mind, it is entirely unfair that I would have to put my hard-earned money into causes I entirely disagree with. The vast majority of the money I would pay goes to two things: wars (in Iraq) and the bailout. I disagree with both of these things.

    This would be fine, except I have no way to support people who do share my views. I can’t vote. I can’t even make campaign contributions (illegal for minors). I do volunteer, but that’s to support my candidates – I still am forced to live with all those I don’t support, especially on a national level.

    I also reason that in a way I am planning for the future burden of IMMENSE taxes. Maybe thats the question I have for all you older folks: why aren’t you paying more taxes? Instead, you (I know it’s really not literally you) shovel immense debt onto my generation, to the tune of 10 trillion dollars. Put another way, I’m already 10s of thousands of dollars in debt and I don’t even have a credit card.

    It all comes down to the principle this country was founded on: no taxation without representation.

    Anonymous

  22. Let me guess – the nanny?

    I’m with you – taxes should be paid.

    This is the real reason that waiters etc want to keep their silly ‘tip’ system – it has nothing to do with good service but rather avoiding tax!

    ABCs of Investing

  23. What confuses me is this: A check doesn’t create a record, but a billpay transfer does?

    This tax cheat is not only cheating, but also apparently stupid.

    MITBeta @ Don’t Feed The Alligators

  24. In my country it’s like a national sport not to pay income taxes. Or not to pay for all income. Most people are reported to earn less than they actually do in order to pay less taxes. It is good for them and good for their companies as well. However, I would never accept such an offer as it is ‘carpe diem’ – pension is calculated based on reported lifetime income = reported lifetime contributions.
    Truth be said my net income is 55% of the gross…

    European

  25. I report all of my income. I don’t have a choice in the matter since I work a standard 9-5 and my company reports it for me. But even from side ventures, like ebay and adsense revenues. If they’re sufficient enough to warrant being taxed I report that money. The I’ve only not filed taxes 2 years since I started earning money at 12. Both years taxes weren’t taken from my check (so I wouldn’t be getting anything back) and I didn’t make enough to have to pay.

    I believe in paying my fair share of taxes. It’s the right thing to do. It’s the responsible thing to do. It’s part of what it means to be a citizen. If you have an issue with how the money is used, a) strive to pay less legally or b) go vote (Nov 4).

    CJ

  26. @ CJ and others. The thing you have to understand is that we live in an established system that wrestles to maintain the status quo. To some the status quo is fine. They see it as “the way things are.” The problem is this – things just aren’t “the way they are.” Everything changes. Everything emerges at one point, changes, evolves, devolves and is eventually eradicated. The only universal constant is that everything changes.

    What is the status quo now? Billions of people on our planet live below 2$ a day in unsanitary – just aweful – conditions that many people here can’t even comprehend. I can’t even… all I know is that it’s bad and it’s bad for most of us. We (humanity) have the resources to feed every human, clothe every human, house them, educate them. (And I know a counter argument is that if you give them all that they’ll leach off of it and be lazy – the fact is it’s not in our nature to do that. Look at how many retiree’s continue to work, go to school or better… volunteer to keep themselves busy. Statistics indicate that most people on welfare work hard to feed their family and meet unfair taxes and rising energy/food costs – caused by inflation, our invisible tax. The mentality behind accusing people of being lazy if they’re given everything is competitive, envious, selfish and hypocritical.)

    We have the resources to raise the standard of living for every human being but we’re still stuck with poverty, war, competition, corruption, crime. This is not human nature, it’s human behavior derived from a sick society based on competition of unreal scarcity.

    You can’t fix it from within the system by voting or putting money where your mouth is. A single vote for a candidate who can fix things matters little compared to the millions of dollars candidates get from campaign contributions and lobbyists used to convince thousands of other gullible people to vote for their candidate. 90% of all elections are won by the candidate that spent the most money campaigning. That isn’t democratic. Your vote is merely a message and one that often isn’t heard.

    I love America, I love the American people but I don’t put them on a pedestal higher than everyone else in the world. We’re all equal. We’re all born with the same fundamental rights the same biology (99.9% of everyone’s DNA is the same) Duty belongs to the citizens of the world not just the United States or whatever country you live in. Us vs. them mentality and nationalism are dangerous – competition means there’s always a loser. Cooperation = equality. And equality means everyone is healthy and educated instead of billions of people living in the mud while 1% of the population sucks up 40$ of the wealth (and wastes most of it). Responsibility is due to our planet. The “right thing to do” isn’t to support a system that paralyzes the rest of the world from moving forward.

    “It [paying taxes] is part of what it means to be a citizen.” – CJ

    Jeremy above used a great quote and I’ll repeat it here: “It’s no measure of health to be well adjusted to a sick society.” If you need some inspiration from a genuine American and patriotic source – look to your own Declaration of Independence. It encourages you to challenge the status-quo and oppose those who defend it. America has become that which it has fought so hard to escape.

    You’re right – paying taxes IS part of what it means to be a citizen. But what else does it mean to be a citizen? Conforming to the status quo.

    Everything changes. Everything. The harder the status quo resists change, the more sh** will hit the fan when it finally does change. Remember your history and recognize that it’s repeating in a different form.

    When was the last time patriotic, strong christian, right-wing citizens banded together, furious to defend their idea about what their country should be? Chastising “minorities” (now Muslims and anti-patriots and terrorists – which for some are synonymous) and covering up protests about it (like the peaceful protests in St. Paul at the Republican National Convention that were trounced by paramilitary forces with tear-gas.) and removed civil liberties (the patriot act) to defend “freedom” and “the nation.” ????? When was the last – at least easily recognizable instance of this??? It’s only been 70ish years, do I really have to remind you about how the Nazi party came to power in Germany?

    “Don’t listen to Jeevz – He’s an extremist.” That’s how many of you will react to me and my post. Well… we live in extreme times. Too many are plugged into their iPod and too absorbed by their reality TV to realize what a mess we’re in.

    “[Paying taxes] is part of what it means to be a citizen.” So is xenophobia, corporate imperialism, conformity and duty to the few million around you who also subscribe to this philosophy and not to the BILLIONS who suffer because of it.

    67% of the federal budget goes to the military. That doesn’t include high federal wages, bail out packages and the like. You may want to pay taxes for education, roads, water treatment and health services – but they’re not getting the money (or enough.)

    Like Jeremy above – I’m not criticizing you for paying taxes, you’re forced to do it (not just by the government but also mob mentality) and to not do it means you’d be segregating yourself from most of the population (the sheep without shepherds, if you will) because they (people like you now) will ostracize …err… you or worse. BUT – don’t criticize the brave few who will subject themselves to that misery for the greater good of our planet and humanity.

    Jeevz

  27. Trust me – you benefit from that person not paying taxes. Those who are self-employed in the personal service industry (personal training, massage therapy, house cleaing, dog-walking, prostitution, tutoring, etc) are able to keep their services more affordable for YOU by not giving Uncle Sam his cut. On average, they’d have to charge you about 15% more to maintain their current standard of living (which, trust me, is significantly below that of their clients to begin with). So the tax they’re not paying benefits both parties.

    And when you look at a self-employed person’s fees, remember – nearly all of us get no sick pay, vacation/holiday pay, health benefits, 401K matching, unemployment/disability insurance, etc.

    Anonymous2

    • PERfect example, Anonymous2!!!

      Anonymous10

  28. Those with nannys – are you reporting household employment taxes on your personal return? Once you have payed $1,500 of wages to an employee, household employers are responsible for withholding and pay FICA tax on wages exceeding $1,500. Also, household employers are responsibly for FUTA tax if wages exceeding $1,000 were paid in any quarter.

    Petey

  29. Maybe you should start a church if you don’t want to pay taxes. Or become poor. I think that the system targets the big buldge of people in the middle, so that not as many taxes for those on the top and those on the bottom. Look at the tax code, all those many volumes: the government wants you to spend and invest a certain way. If you save money because of it, so be it. There is nothing wrong with that.

    Lost Cause

  30. I would just like to say that the Income tax is unconstitutional and Illegal. The IRS and its documentation even state that filing a tax return is governed by “voluntary compliance”. It has to be this way because you can be prosecuted and put in jail based on the information that you put on your tax return. Since this is true, requiring you to file your tax returns would be a direct violation of the 5th ammendment, and thus illegal. This would be the government forcing you to give up information that may incriminate you and that could be used against you in court (as tax returns frequently are).

    In addition, the income tax is immoral. When a government wants less of something, they tax it more, when they want more of something, they tax it less. What, then, does this mean about our tax on labor? Yes, we now have fewer jobs in our country that have moved over seas, and while this is obviously not the only reason, it must be a big one. People should simply not be taxed on their labor, and it does not pay for many of the things that you think it pays for. Almost ALL of the day-to-day expenses of the entire government, including war, keeping agencies running, new departments to take away our rights, etc, are funded by the issuence of treasury notes and bills from our treasury. When people or companies buy treasuries, the government gets that money up front in return for a percentage of interest that they must pay out over time. Almost every single tax dollar that you pay (90+%) goes simply to pay off the interest on this government issued debt. The kicker here is that the privately owned Federal Reserve and China own most of the government debt, which means they get most of your tax dollars. The IRS and the Income Tax were put in place the EXACT SAME YEAR as the Federal Reserve (1913), and this is no coincidence. The Federal Reserve system would not work without the income tax, because all of our income tax dollars go to pay them interest on bonds that they bought from our government with money that they printed for free out of thin air! This is wrong!

    The other problem that I have with the income tax is that a tax on labor is slavery. The IRS Code maintains that you should be taxed on any gains or profits from activity etc., etc.. My personal view is that income from a job is not a gain or a profit, but an even trade. The work that you do is worth exactly what you are paid for it, this is how salaries/wages are set. Thus there are no gains and/or profits in this activity, and thus we should not be charged or penalized for this even trade.

    So this is why I have a lot of respect for people that do all that they can to not pay these unjust taxes that are illegally imposed upon us, And I only wish more people would do the same to bring down this system and return America to Freedom as it was meant to be.

    Will

  31. @ Will:

    Jobs are going overseas because labor is cheaper, not because of high taxes. Companies can hire 5, 10, 20, 30 people for the same money it takes to hire 1 in the US.

    Also, I would like to see you cite a source on your claim that 90% of you money goes to service the debt. Your number is a whole order of magnitude off.

    MITBeta @ Don’t Feed The Alligators

  32. Labor overseas has always been cheaper – it’s their productivity that has gone up. THAT isn’t a bad thing. What is bad is that we’ve been accustomed to being paid more because we have always been the most productive labor force and as people catch up to us our productivity hasn’t increased respectively. This (with other reasons as well) is why our mismanaged taxes ought to be moved towards things like education and technilogical innovation. Instead our government – swayed by corporate campaign contributions and the corporate owned lobby company – passes legislation that favors profits over education and technology and we stunt ourselves.

    Jeremy Keith Hammond

  33. I agree that our taxes are mismanaged, and i disagree with (federal) government funding of the things you mention like education and technological innovation. None of these things should be in the federal governments budget whatsoever. I also agree, however, that we should get rid of the many subsidies and forced-monopolies that our system of regulation imposes on the markets. Why does the government subsidize the cost of oil with our tax dollars and then tax us when we buy oil, and then claim that they are going to stick it to Exxon and Shell by raising their taxes on the profits that they have subsidized anyway. It’s a whole mess. Maybe if we all stopped paying our taxes, the government would be forced to bring its size, power, and spending back to what it should be, and thats probably around 1/3 the current size/spending IMO.

    Will

  34. @ Davod The top 5% of income earners in the US pay 95% of the money the IRS collects. The IRS does provide tax breaks if you do what the government wants you to do with your money. For example, if you buy a house you get to deduct a percentage of the interest.

    I agree that the wealthy have more of these opportunities than us average worker bees, but they are perfectly legal and not the same as a “tax cheat” and shouldn’t be treated the same. I often get tired of this “Robin Hood” mentality that many people have about people who make more money then they do.

    As for jobs going overseas.. keep in mind sometimes it is in the best interest of the company. For example, I work for a large aerospace company and in order to get China to order more airplanes, my company set up a shop there so that they would have a vested interest in buying our airplanes. Of course the machinists here only saw that some jobs went overseas and cried fowl. If my company had not done that, I can guarantee you our European competitors would have and than our machinists wouldn’t have those jobs anyhow cause we wouldn’t have those airplane orders.

    @ Jeremy I agree that we need many changes in this government, but not paying taxes isn’t going to solve the fact that we keep putting the same not-so-desirable people in power. Keep in mind, With all that Al Capone was suspected of, with all everyone knew he did the thing that put him in prison was not paying taxes. Your statement that Tax is voluntary was true when the country first started… but the government learned quickly that it needed money to fund wars and buy land to fulfill our “Manifest Destiny” and so they went to the people and asked them to vote for the tax… ” we will only tax the rich” they said, and people bought the Robin Hood story.

    @ Madison It is very common in the service industry to not always report cash that is exchanged. When you tip your pizza delivery guy… its not getting reported. When you tip the bell hop at the overpriced hotel… its not getting reported. That does not bother me too much cause they do get a base pay that is taxed. However, if someone were to ask me to pay them in cash so they don’t have to claim any of it to the government, well that makes me question their character. If this person worked around my family, I would be looking for someone else as I wouldn’t want someone with obviously questionable ethics around my family.

    Kris

  35. In the past few years I’ve started paying taxes on everything. I think a greater problem is people knowing when they need to pay taxes. Around tax time I wrote about filing my alt income (mystery shopping). I got a comment that without a 1099 it wasn’t necessary, but a call to the IRS said otherwise.

    In high school I wouldn’t have thought to add up the cash I made babysitting and report it along with my retail job.

    sara l

  36. Couple of thoughts on this situation as an ethical question:

    1. The price that you’re paying for your “service provider” is set by the market for the service in your area.

    2. It seems like the large majority of the potential competitors for your business are also not paying taxes.

    3. If those “service providers” did all report their income, the market would set the price at a higher level. Probably at a level where the “service provider” would take home just about the same amount of cash.

    From that point of view, you are the one benefiting from the fact that your service provider is not reporting his/her income, not the service provider himself/herself.

    In light of that, it seems to me that if you want to be totally morally responsible you should require that he/she pay taxes and give him/her a raise sufficient to cover those taxes. That would mean that you would then be paying the full market price for the service, as opposed to what you’re paying now, which is a price that has been artificially reduced by the fact that people are cheating on their taxes.

    One could argue that what you’re doing is not much different from buying something at a discount that you know to be stolen property. Not quite the same as stealing it yourself, but not morally squeaky-clean either.

    Ian

  37. I employ a nanny. As a licensed CPA, I told all of our prospective nanny candidates that I would be withholding the appropriate taxes from their salaries, according to their elections. If I misreport this type of thing, I could lose my license and my livlihood. Did we lose a couple of qualified candidates because I did this? Yes. Did we get a great nanny who was fine with being a responsible citizen? Yes. Sometimes complying with the law is hard. Tough. Do it.

    For those of you who say you don’t pay taxes because you disagree with the war in Iraq, or with anything else, I’ll just say this: I’m sure everyone in our country disagrees with something the government is doing. Should we all stop paying taxes? Before you shoot off an all-too-hipster response of “yes,” imagine all social security, all medicare, all police services, and all other government-provided services going away. That’s what you’d be asking to do.

    Jerry

    Jerry

  38. “Sometimes complying with the law is hard. Tough. Do it.” – Jerry

    Our declaration of independence encourages us to challenge authority just as our founding fathers did. Is it the law to pay the government so that it can wage wars overseas? Yes. Is it moral? No. There have been plenty of laws in history. Nazis had laws. Does that mean they should be followed? Not necessarily. Would you criticize a Jew in the Warsaw ghetto for standing up for his human rights? Some here are standing up for the human rights of millions of people around the world which the US disregards.

    Not paying taxes to send a message is civil disobedience. Civil disobedience has a long very proud, very American history. It has solved a lot of problems in our country including slavery, voting rights for women (or rather the previous lack thereof), discrimination and recently human caused environmental degradation.

    It’s chauvinistic to follow a law simply because it’s a law. Things always need to change and always for the better because we will never have a perfect system. If you can’t solve a system from within the system you have to think and act outside of the box. There is nothing wrong with this and we, here in America, have a very proud history of doing just that.

    If we stop paying taxes – you say social security, health care, education and infrastructure will suffer. Only if our government decides to cut those before the military which consists of 60% of the Federal Budget to fund bases in over 100 countries, hundreds of thousands of nuclear warheads we will never use – enough to ignite the entire surface of the planet a dozen times, and the most powerful army in the world that can’t even win a war in the impoverished nations of Iraq and Afghanistan. War just doesn’t work in a modern world. It just doesn’t. Troops and sailors in every land and sea should be brought home.

    Jeremy Keith Hammond

  39. Our founding fathers, signers of the Declaration of Independence – were subjects to the crown of England – a very real and respectable government. They recognized immoralities and challenged the authority and gave us a country where we could do the same. They stopped paying taxes. They took it a step further and dumped tea into Boston harbor. They went even further and started a war.

    Change for the betterment of society is inevitable. The harder change is resisted – the harder change hits us. Right now the powers that be are too powerful and we cannot democratically make change in our country. The government has allowed (unelected) corporations to decide how resources are allocated. Corporations, because we live in a capitalist society that rewards competition, will put profits above the general public – no matter how clean they make it look.

    They also wield that power in government and society by inundating Washington with lobbyists and controlling main stream media.

    There’s a reason that “duty” has been put on such a high pedestal in our society – it keeps you in line. But you should know what’s at the end of that line, or why there is a line before you commit to staying in it.

    Jeevz

  40. I think the above posters make some excellent points.

    The one that should be at the forefront is that no one should blindly follow authority because authority has a history of ALWAYS being corrupt. You don’t follow rules because they’re rules. You have to agree to play the game first. If the game is unfair – don’t play it.

    The point is to keep an open-mind and not remain complacent. We, as Americans, have been hit hard by something evil (foreclosures, stock market crash, lost civil liberties, etc.) we have the right to know what’s going on. We have the right of indignation. We have the right to challenge it.

    Ben Tasker

  41. 2 words; National Sales Tax! all is fair and you have a choice to buy or not to buy. It forces the government to live within its means just as we have to. it is the fairest to all. If you buy something you pay tax…everyone!. It doesn’t matter what you do, where the money comes from or how many loopholes you can find. Rich people, poor people, drug dealers, prostitutes, tourists or nannys You buy you pay. That’s Fair!

    Ken

  42. @Ken

    I agree completely that this system is much more fair, and it is avoidable to an extent. I would much rather this system than what we have now, but that being said. I think this could and should be an intermediate step for getting rid of the income tax as well as such a fair tax. If they government got to the size it needs to be, neither of these taxes would be needed and the government could actually protect us while living within its means. Good post.

    Will

  43. @ Ken, I couldn’t agree more. That is what we have in Washington State instead of an income tax ( though the liberals want to add an income tax too ). I agree this would be the fairest way to tax as the more you spend on toys the more you share your wealth with uncle sam.

    @ Jeremy, If you want to stop paying taxes to send a message then go ahead and I am sure your cell-mates will love to hear your message.

    There are better ways to inspire change.

    Kris

  44. People have tried to use the Fifth Amendment to not file tax returns, though the court has struck that down. However, the crime in that case is failing to file a tax return. It sounds like what you MAY be able to do, however, is file a tax return, and just claim the Fifth instead of reporting income. Specifically, the article says you’re expected to claim “Fifth Amendment Income” instead of income due to illegal activities (i.e. “Cocaine Sales” or “Prostitution Fees”), and pay taxes on that illegal income.

    http://en.wikipedia.org/wiki/F.....ax_returns

    I don’t know who would pay taxes on illegal income, but that’s how the court suggests you do it. I’m suggesting that one might be able to take it one step further and refuse to report the amount of income, instead of just the type of income.

    (I’m running through the arguments in my head now) However, the IRS may argue that the actual amount of income earned could not be used as evidence against you.

    Then again, if you pay SOME taxes, but pay the wrong amount you could claim the Fifth when reporting other income that would dictate you should’ve paid more? Of course, the Man could probably subpoena your employer and prove you paid the wrong amount, without violating the Fifth. I don’t know if you can plead the Fifth during an audit.

    Mutant Platypus

  45. EDIT: Okay, I’m not sure what happened to my first post, so I’ll briefly repeat it here: I pondered the effectiveness of the using the Fifth and asserting that you have rights to refuse to report income.

    After a bit more research, I found this case:

    US v Carlson

    http://sorabji.com/l/law/F2/61.....-1277.html

    If you’d like to protest taxes, this case should be required reading.

    The court doesn’t like it when you use the Fifth to avoid justice, and the judge took into account that Carlson cited every argument out there to avoid taxes. This led the court to believe that Carlson was using the Fifth in an offensive manner, while the Fifth was intended to be used defensively. When the court considered this when balancing the protection of the individual against the governments interests, it considerably weakened the weight of his Fifth amendment argument. I’m nowhere near a lawyer, but it sounds like if you had the right supreme court justices you might be able to get a favorable judgment, as long as you don’t concoct or are connected to some elaborate plan to protest taxes. Instead of saying taxes are unconstitutional because Ohio wasn’t a state at the right time, it may be easier to argue that you don’t want to declare your income because a discrepancy could result in a criminal suit. I don’t have the guts to do such a thing, but I’d love to see someone take up the case.

    Its not like the government would collapse without the income tax, they could easily charge a flat retail tax or some such thing. They’d just be forced to use a tax method that wouldn’t be as easily used for social engineering

    It would probably be easier to just work within the political system to reform the tax code, especially with how popular the idea seems to be at present. With all these deductions and difference tax brackets, the government uses the tax for social engineering purposes, NOT just revenue raising ones. Although this may work in favor of your ideals during one election cycle, its easy to argue a change in power could quickly invert the government’s social engineering goals to something you find abhorrent.

    Mutant Platypus

  46. @ Kris, You’re right, there are better ways to inspire change, still within the realm of civil disobedience too.

    Many people heard the words of Gandhi from his several years in prison. Prison shouldn’t inhibit change. In fact, it can make some martyrs. No – I don’t compare myself to that miracle of a man, I pay taxes. I said that before.

    Ben Tasker above sums up what I’m trying to say. At least question authority if you wont challenge it.

    As for tax reform – I would follow a model described by Ralph Nader http://www.votenader.org/issues/fiscal/fair-tax/

    Jeremy Keith Hammond

  47. I have to add one category of f—ed taxpayers: US Citizens working abroad. The US is one of the only countries that requires that you pay tax on your worldwide income- even if you don’t step foot on US soil for the entire year. So you are being taxed without receiving any services except holding a US Passport. Contrast that to other countries (UK, Australia, all EU countries, Japan, etc, etc.) where as long as you work and stay abroad for more than 180 days in the calendar year you don’t have to pay taxes. Seems fair.

    Too bad the US doesn’t care about it’s expatriates.

    It is true that you can offset the tax burden with taxes you have to pay while working abroad and also, that there is a taxable exemption for the first $83K of income. However the foreign tax credit is means tested and the total foreign taxes paid is reduced by calculation so you have to write another check to Uncle Sam.

    As example, my effective tax rate abroad is 35% (currently the highest US tax rate for Federal tax) and yet I have to write Uncle Sam an addional check for about 6% more. Where is Obama to help me out? Is this paying my share? For what, exactly?

    I don’t use the roads, hospitals, schools, or airports.

    Go ahead and don’t pay your taxes. It’s all a crooked setup anyway.

    Mike

    Mike Hunt

  48. I love paying taxes on money that I earn. I’m not so crazy about double taxation on dividends but you take the good with the bad. I wish I made enough to have to pay a million dollars a year in taxes. I also enjoy paved roads, a military that protects me day and night and tons of other benefits. I don’t understand the notion that paying the government your fair share is somehow unfair or unjust.

    John Bishop

  49. @John Bishop Paying your fair share isn’t unfair or unjust, people take issue with who decides how much your fair share is, what you pay for (especially), and that if you don’t pay it you get thrown in jail, your assets are confiscated, etc.

    I don’t think many people here are arguing against taxes in an of themselves, just the current progressive income task on labor and investment, and how it reduces incentives to work and invest, especially when used to fund entitlement programs.

    Mutant Platypus

  50. Great discussion here.
    I just hope there are no IRS agents lurking here, but
    i am sure that Patriot Act supporters are here somewhere
    I wonder if paying taxes would be considered a treason according to this Patriot Act. In any case, taxes, especially if they are used to fund fat severence packages for the failed institution’s execs and war that started only because Cheney wanted a piece of a taxpayers money pie, do not have to be paid. No one asked people of this country if this is what we want and no one so it seems ever will. I report all of my income as I have to, as far as taxes…..I put away as much money into my 401K as I can so I do not pay as much in taxes. Problem solved!!!

    RY, New York, NY

  51. I didn’t read all the posts, so I may be duplicating prior information. As a CPA and taxpayer, I am also enraged to hear when people do not report all their income and pay their share of taxes. The IRS recently did a study to estimate the tax gap, in which it reported that a large percentage of high-income individuals under-report their income (surprise, surprise), mostly because they have an easier time hiding income and inflating business expenses. As far as the “voluntary” system, that completely false. See the IRS website at http://www.irs.gov/taxpros/article/0,,id=159932,00.html a description of these “frivolous tax arguments”. It also covers the “unconstitutional” argument and all the rest that are most popular. Not paying taxes on income is called tax evasion and it is criminally punishable.

    Miriam

  52. I understand why it is that you have to pay taxes – it’s the law, and the punishments are severe. What I do not understand is you indignation about the people that manage to hide a little of their money from IRS. It’s probably a matter of couple of 100 dollars or so, nothing is gonna suffer – it’s not like it’s going to make a dent in 3+ trillion federal budget. Any random federal-level politician steals several million times that in pork and wastes another several million times that on all kinds of stupid projects and just on flying around and talking about nothing. And 46% of US population pays exactly 0 taxes. Many of them contribute much less to the society than your service provider, but somehow when they try to keep a small part of their income from being taken from them it really infuriates people – the way wasting billions and trillions never does. So of course now we need to go to have IRS police come to them and waste another couple of tens of thousands of taxpayer money to prosecute them for hiding a couple of hundreds of dollars from IRS.

    On top of that, the requirements for legally doing business are unfortunately very onerous and time-consuming, as you probably know. You have to fill out tons of forms, get a number of permits and licenses, have accountant to figure out what to pay and where, etc. This does not produce any value, does not do good to anybody – it’s pure waste of money and effort, existing for one reason only – because politicians’ gamesmanship created a byzantine tax code that nobody (not even Senators and federal department heads, as we’ve recently seen) can figure out without having dedicated professionals just for that.

    So is hiding income illegal? Yes, it is. Would I do it? No, I would not. Would I be enraged if some person tried to hide some of the income from the IRS? Unless we’re talking about good chunk of money – I’m ready to accept Obama’s 250K criteria on that – no, not really, I can’t muster any righteous indignation. I think he needs those 100 dollars more than IRS does.

    P.S. Just to remove the doubt, I pay all income taxes in full, 100%. And state taxes. And sales taxes. And whatever other taxes there are, all of them. And it’s not a small sum either.

    P.P.S. Ah, wait, I don’t pay all of them. I recently bought something from Amazon, and by the California law now I have to find some way (no idea how, though I’m sure for mere $300 or so I could find an accountant that would tell me how to pay these $0.92) to report it and pay sales tax on it. I admit I didn’t really do that (as I’m sure none of Californians did either). I’m sure you’re very angry with me now, sorry about that. I hope you won’t set the police on me for it and I won’t end up in jail where instead of me earning my living and paying a lot of taxes other taxpayers would have to pay for my upkeep. I’m sure the latter is much better for everybody, especially such a dirty tax cheat as I am, but I still hope it does not happen. Sorry again.

    SM

    • Hi SM,

      No, this wasn’t about a “couple of 100 dollars”, this is someone that was not reporting at least $50,000 every year for over 25 years. Not what I would consider a little bit of money…

      However, I do realize that my attitude is more of a personal issue with the person. I realize this because when I hear stories about others cheating on their taxes, it doesn’t anger me, like this particular case did.

      The reason this bothered me so much was that this was more than just a service provider to my family, it was someone who was going to be teaching my children. Someone that I trusted my children with and was like an extension of my family.

      But an even bigger personal problem was that I have to report how much I am paying this person on my taxes. Are they then asking me to lie on my taxes about how much I’m paying them? Now, it just isn’t about them anymore, it involves me, and that’s I think where the root of my anger evolved from.

      Madison


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