Working For Free?
Report Any “Under the Table” Earnings
The recession is still damaging California with its poor job opportunities and high cost of living. On top of that, people working in California still have to pay a state income tax in addition to the federal income tax. The state income tax rate is between 1% and 10%, which is determined by the amount of income a person makes within a year. Most people end up paying at least 5% of their income to the state, which can be a lot when you are living paycheck to paycheck. This is why more and more Californians are working “under the table” instead of getting a regular paycheck. In other words, they are getting cash payments for their labor that is given to them directly by their employer. This is most commonly done with service jobs, like waitressing and bartending, where workers get cash tips that they never claim to the IRS or California Tax Service Center. They think if they don’t deposit the cash in their bank account then there won’t be any proof of the income.
A person may be able to get away with a few dollars hidden here and there, but eventually it will catch up with them. You see if a person gets audited, the tax agents will look at their expenses as well as their income. If they see somebody with $20,000 worth of expenses every year only making $5,000 on the books, then it will obviously be a red flag that money is being hidden. When you get cash income from your employer, what are you going to spend that money on? Unless you are buying lots of video games and television sets, chances are you will be spending that money on food, rent and car payments. The income on the books needs to coincide with the expenses you have or else you will be in trouble. The IRS and state tax agents have very sophisticated technology to scan for red flags in every tax return.
Nobody likes paying taxes and the tax laws definitely seem unfair to people who are barely making ends meet. However, the repercussions of cheating on your income tax forms is a whole lot worse than having to pay a portion of your income in taxes every year. If you get into legal trouble then you are looking at thousands of dollars in attorney fees along with having to repay the taxes you owe, plus interest and penalties. This makes income tax seem pretty small in comparison.
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