T Nation

Beating the IRS?

Obviously if you are on company payroll you can’t avoid paying income tax.

But what if you own a small business? For example, suppose you’re a professional eBayer making primarily small transactions which don’t have to be reported to the IRS on an individual basis. Suppose you also use multiple bank accounts in different banks so that money donesn’t accumiulate in any one too quickly. How would the IRS find you in this case? How does the IRS find anyone who doesn’t pay taxes?

Or, what if you used an offshore bank in a country with no income tax and no reporting requirements? Could you have all of your ebay income transferred directly from your customers to the offshore account and then live out of the offshore account?

Usually a red flag will pop up at the IRS when you show some inconsistency from year to year. Usually a drastic one. Also, averages have shown that those who file for extensions are less likely to fall victim to audits.

As far as “finding you” goes, understand that in order to obtain accounts, you must submit social security numbers along with other info. And in today’s computer world, it’s easier than ever to “see” what everyone is doing. I just recently was shocked when a friend of mine (who is a realtor) admitted he looked at my confidential tax info online!

What’s wrong with just paying your taxes like your supposed to?

[quote]kelleyb wrote:
What’s wrong with just paying your taxes like your supposed to? [/quote]

Heh heh! I’m with ya’ on that one, Lixy.

Speaking of not paying, and in spite of my usual political leanings, I was sure excited about Huckabee’s proposed Fair Tax plan.

[quote]kelleyb wrote:
What’s wrong with just paying your taxes like your supposed to? [/quote]

I have no problem paying taxes. I do have a problem being self employed and then having to turn over 40% or more of my profits to the IRS because I’m good at my job. People who make decent money should not have to pay for those who don’t.

Monopoly

[quote]belligerent wrote:
Obviously if you are on company payroll you can’t avoid paying income tax.

But what if you own a small business? For example, suppose you’re a professional eBayer making primarily small transactions which don’t have to be reported to the IRS on an individual basis. Suppose you also use multiple bank accounts in different banks so that money donesn’t accumiulate in any one too quickly. How would the IRS find you in this case? How does the IRS find anyone who doesn’t pay taxes?

Or, what if you used an offshore bank in a country with no income tax and no reporting requirements? Could you have all of your ebay income transferred directly from your customers to the offshore account and then live out of the offshore account?

[/quote]

If you are concerned about paying too much in taxes find a kick ass tax atty and work out a strategy. I know mine makes the top 10 list of things I am thankful for each year and self-employed people are foolish not to be working with one.

[quote]Monopoly19 wrote:
kelleyb wrote:
What’s wrong with just paying your taxes like your supposed to?

I have no problem paying taxes. I do have a problem being self employed and then having to turn over 40% or more of my profits to the IRS because I’m good at my job. People who make decent money should not have to pay for those who don’t.

Monopoly
[/quote]

That is a really good point.

[quote]Monopoly19 wrote:
kelleyb wrote:
What’s wrong with just paying your taxes like your supposed to?

I have no problem paying taxes. I do have a problem being self employed and then having to turn over 40% or more of my profits to the IRS because I’m good at my job. People who make decent money should not have to pay for those who don’t.

Monopoly
[/quote]

What a novel concept!

Anyone here been audited?

[quote]belligerent wrote:
Or, what if you used an offshore bank in a country with no income tax and no reporting requirements? Could you have all of your ebay income transferred directly from your customers to the offshore account and then live out of the offshore account?
[/quote]

These things can and do happen quite often but more so among the relatively wealthy than others; folks with investment incomes of a couple million or more are on the tax roles mostly because they choose to be. There are some fairly elaborate trust / business strategies that involve hiding funds offshore in jurisdictions where the US government has no power and the local courts won’t hear the cases but if your intention is to evade taxes you’ll eventually wind up spendin a few years as Uncle Sam’s houseguest.

The IRS is very active in tracking these strategies and regulating / litigating against the successful ones which, of course, only forces creative attorneys and accountants to formulate new plan. Heck it’s even illegal to ship all of your money to a tax haven jurisdiction, move there, and renounce your US citizenship … if your intent is to evade taxes by doing so.

[quote]Natural Nate wrote:
Anyone here been audited?[/quote]

Yup…I’m still standing.

[quote]apwsearch wrote:
Natural Nate wrote:
Anyone here been audited?

Yup…I’m still standing.[/quote]

And still hawking your Hollywood Upstairs Medical College degree as the real thing!

As a writer, I have a lot of payments come my way from people who don’t even know my name - I mail off an article or ebook under a pen name, they publish it as their own book, and I get money through paypal. I can theoretically not pay for taxes on those ones.

As hard as it is to fork over 40% (and I know, trust me), it is worse if you get caught. They will peel through everything. It can get brutal. With all the different crap involved with being self employed, it can get complicated fast, and you’ll wish you just paid the taxes.

[quote]Natural Nate wrote:
apwsearch wrote:
Natural Nate wrote:
Anyone here been audited?

Yup…I’m still standing.

And still hawking your Hollywood Upstairs Medical College degree as the real thing![/quote]

Bwahahahhahhaa. That was awesome.

Good thing I pay my malpractice premiums on time!

[quote]Squiggles wrote:
As a writer, I have a lot of payments come my way from people who don’t even know my name - I mail off an article or ebook under a pen name, they publish it as their own book, and I get money through paypal. I can theoretically not pay for taxes on those ones.

As hard as it is to fork over 40% (and I know, trust me), it is worse if you get caught. They will peel through everything. It can get brutal. With all the different crap involved with being self employed, it can get complicated fast, and you’ll wish you just paid the taxes.

[/quote]

I started to say the same thing and then in my mind just broke it down to getting a good tax atty. (Notice I didn’t say CPA.)

That was the best advice (and referral) I think I have ever gotten in my professional life.

[quote]apwsearch wrote:
I started to say the same thing and then in my mind just broke it down to getting a good tax atty. (Notice I didn’t say CPA.)

That was the best advice (and referral) I think I have ever gotten in my professional life.[/quote]

Why not a CPA?

[quote]Squiggles wrote:
As a writer, I have a lot of payments come my way from people who don’t even know my name - I mail off an article or ebook under a pen name, they publish it as their own book, and I get money through paypal. I can theoretically not pay for taxes on those ones.
[/quote]

Actually, Paypal works very closely with the IRS, and will suspend your account for unusual activity. Anything that remotely looks like money-laundering.

Also, didn`t you have to give Paypal a SS# when registering?

[quote]apwsearch wrote:

If you are concerned about paying too much in taxes find a kick ass tax atty and work out a strategy. I know mine makes the top 10 list of things I am thankful for each year and self-employed people are foolish not to be working with one. [/quote]

You are on the money here. I have a great person that I work with, and he saves me money. However, I’m pushing the envelope for sure. If I got audited I don’t think it would be pretty. For me it’s worth the risk.

Monopoly

The IRS made a project out of me once. I’ll do pretty much anything to make sure it doesn’t happen again.

I’m with APW and Monopoly, because it’s invariably the innocent, ill-informed small businessman they target and not the fat cat who represents serious fraud.

Anyone that wants the whole story has to buy me scotch.