Wednesday, April 6, 2011

Don't Mess With the IRS

Penalties of Paying Under-The-Table

Paying off-the-books is tax evasion which is subject to fines, back taxes, interest, and even prison time. The amount you owe to the IRS, if you don’t file, is penalized at 47.5% interest (22.5% for late filing and 25% of the total for not filing).

To collect monies owed, the IRS can levy your wages, your bank account, and/or put a federal tax lien against your social security number.

Since tax evasion is a felony, there are strict penalties of jail time and loss of professional license. For example, licensed professionals such as doctors, attorneys, and accountants can lose their licenses and ability to practice their profession if caught for tax evasion.

The more blatantly fraudulent your behavior has been, the more likely the IRS is to prosecute you.

In order to convict you of a tax crime, the IRS does not have to prove the exact amount you owe.

Here are some penalties listed in order of their severity:

Criminal fraud: This is tax evasion, which is illegal. If convicted of this penalty the tax payer will be subject to heavy court determined fines, imprisonment, or both .

Civil fraud: Tax payer fraud that does not rise to the level of criminal fraud. If imposed, the penalty is 75% of the portion of tax underpayment attributable to fraud.

Negligence: This is a penalty imposed if any part of the tax rules and regulations are neglected without the intent to defraud. The penalty is 20% of the portion of the underpayments attributable to the negligence.

Frivolous Return: A frivolous return is one that emits certain information necessary to determine the tax payer’s tax liability, such as her Social Security number. The penalty is $500 for each frivolous return filed.

Check out the IRS website for more answers to your nanny tax questions.


Fiona Littleton said...

There was one job for almost 3 years I didn't know how to ask how the parents to do it. I was always scared. Although they wrote "cash" on the check it would be obvious to anyone several hundred $ in my bank account from theirs each week was a paycheck. I was scared. The boss was a lawyer too. Dumb.

Anonymous said...

Well I am paid on the books every single cent and take home what nannies making nearly half my salary bring home.

I made over $75K in 2010 and took home less than $45K. And you wonder why nannies want to get paid under the table??

I haven't asked the parents to pay me off the books because they are both accountants and it would be breaking the law. I just wish they could just bend the rules A LITTLE. For example, just give me overtime, extra weekend babysiting and bonuses paid in cash and off the books would help me tremendously. But I realize that's illegal so I don't ask.

But remember the nanny that earns more than $75K takes home only $45K next time you criticize why american citizens allow themselves to be paid under the table.

Wendy said...

That's what happens anonymous once you get in the higher tax brackets, you don't keep the money it goes to the government so what's the point of getting a higher salary?