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I'm currently working full time while doing a lot of smaller side jobs. I pay a very large amount of taxes at my job while doing all of the side work under the table. I usually receive payments through Paypal. Is there any possibility of the IRS flagging me on this? Eventually I want to transition into doing the side jobs full time. When it comes time for that, I figure I would report some of the income but not all of it. I know it's fraudulent but I know many people out there do it. Have you ever been caught? What did you do to avoid being flagged? My belief is that we pay way too much in taxes but willing to pay some. What are your thoughts?
You'd be walking a dangerous line by not doing it because it really isn't under the table if it's paid by Paypal. There it is actually documented amounts verses under the table which is strictly cash and no checks.
The most common way of getting caught is when someone else involved in the transaction reports their part in the activity, and your records don't match up with theirs. And paypal definitely reports their transactions to the IRS. It's possible you'll get away with it, but you are taking a risk. Only you can decide if you're willing to risk the penalties and possible jail time.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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If any one customer pays you over $600 in the tax year they are required to file IRS form 1099,
and you have to report that or will trigger investigation and/or audit. You would know, they have to send you a copy before February ends. Do your taxes after that.
If you ever did get audited they could look at Paypal but if your regular salary is fairly average that's not likely unless you are among the unlucky random selections.
You'd be walking a dangerous line by not doing it because it really isn't under the table if it's paid by Paypal. There it is actually documented amounts verses under the table which is strictly cash and no checks.
This.
It isn't worth it, be thankful you are doing well during these times and just pay the tax and go on.
Here's the problem. You will get away with it for a while, you save small amounts in taxes maybe $1,000, $4,000 or even $10,000 but they are pretty small amounts in the overall scheme of things.
But over time these amounts add up and they can get really serious once you tack on penalties and interest. Then, if you were really serious in your tax evasion, you can even start to tack on federal prison time and that is no fun even in Club Fed.
The IRS can only go back a few years, I think it is five years but not sure, for a standard audit but if tax evasion they can go back FOREVER and that can get really nasty fast. You could end up spending more on an attorney, not counting the tax, penalties and compounded daily interest on all this, to fight the jail time than you saved on not paying the taxes.
As a previous poster pointed out your troubles will begin when one of your clients gets audited. They'll see where he paid you, didn't send a 1099 and then check your junk and you be in trouble.
Here is some information on your issue from ebay/Paypal and the IRS
This is specific to what they will do.
Starting January 2011 all U.S. payment providers (most notably PayPal) will be reporting sales numbers to the IRS! This comes as a BIG warning to any American Internet Marketer who hasn’t been reporting all of their online earnings to the IRS! http://www.ethicalim.com/internet-ma...o-irs-in-2011/
Type "Paypal and the IRS" in your browser and everything you need to know comes up on the issue. You might also want to check your state regarding sales tax.
Last edited by Thursday007; 06-19-2011 at 08:19 AM..
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
44,553 posts, read 81,067,970 times
Reputation: 57723
Quote:
Originally Posted by Thursday007
Here is some information on your issue from ebay/Paypal and the IRS
This is specific to what they will do.
Starting January 2011 all U.S. payment providers (most notably PayPal) will be reporting sales numbers to the IRS! This comes as a BIG warning to any American Internet Marketer who hasn’t been reporting all of their online earnings to the IRS! PayPal Must Report Earnings to IRS in 2011
Type "Paypal and the IRS" in your browser and everything you need to know comes up on the issue. You might also want to check your state regarding sales tax.
I doubt that the OP meets the IRS requirement of $20,000 or more in gross sales volume AND 200 payments or more for Paypal to report.
I doubt that the OP meets the IRS requirement of $20,000 or more in gross sales volume AND 200 payments or more for Paypal to report.
well, it's important to note that paypal is only required to report their involvement in sales over 20k. That is not the same thing as saying paypal won't report sales less than that. Or that OP isn't required to pay taxes on fewer sales. Or that the IRS won't find out about it.
It certainly reduces the risk, sure, but it is important to recognize the distinction. Particularly if OP intends to turn this into a full-time business one day.
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