Common Problem: You’re being watched. The IRS has determined that people in the service industry are the most likely to commit Tax Fraud than most. Especially people in cash intensive industries, like mechanics, hairdressers, waiters, and anyone else who works for cash or tips. The temptation for not reporting the cash income is very high. But don’t get too tempted, because you will get caught.
The Crime: Not reporting you whole income is a Criminal Offense. But don’t panic. The IRS usually doesn’t bring Criminal Charges against you unless you owe a huge amount of money. However, you are guaranteed to end up with a huge Tax Debt if you get caught!
IRS Weapons: If you ignore your IRS debt, they’ll have no choice but to unleash their deadly weapons of collections. The top 3 most commonly used weapons are:
1. Bank Levy: The IRS will freeze your bank account, then swoop in and take all your money 21 days later. After the 21 day holding period, you cannot get your money back.
2. Wage Levy: The IRS will claim a portion of your paycheck as their own. A Bank levy is a one-shot deal. But the IRS can garnish your paychecks until your debt is paid in full.
3. Asset Seizure: If you ignore the IRS long enough, the IRS can send an IRS Hitman to your door to seize your property.
Break Out: After you’re in debt with the IRS, there’s really only one way to get out of it. And that’s to face the facts and pay your debt. Here are a couple of good options:
1. Paying in Full: If there is any way you can pay in full, I highly suggest you get to it! The IRS is going to add interest and fees to your account for every month the account is not paid in full. Even if you are paying on the account in monthly payments! So take out a loan or borrow from your uncle if you have to. If paying in full is still not an option, there’s another way to pay on your IRS Debt.
2. Installment Agreement: You can pay on certain amount on your debt every month until it’s paid off. The IRS will choose the amount you can pay based on your income. You’ll basically only have enough money left over to pay for the most basic of needs after your IRS debt is paid. When you apply, the IRS is going to look very closely at your income and your assets. If they determine you can pay your debt in full, you will not be approved for the Installment Agreement.
Back to Work: Don’t tempt the IRS. If you end up in debt, you’ll be trapped. And the only way to get out of it is to pay up. You’re not really saving money when you’re withholding income. So get it right the first time, and make sure you report all your income. Even the tips!