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.

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.

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.

[...] My Dollar Plan: Do You Report All Your Income? [...]

Tax Carnival #42: Election 2008…

Tomorrow is Election Day and, as usual, taxes have played a big part in the process.So it is only fitting that this 42nd Carnival of Taxes is our Election 2008 edition.But before you head into our tax blog voting booth, a few comments.First, we got lot…

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.

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

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/

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.

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.

@ 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.

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.