In news bulletins, they keep announcing all the gains that are being made in America throughout the much-applauded recovery; companies should be turning out better profits, and companies are supposed to be generously adding to their jobs rosters on a regular basis. Even so, compared to how many people are unemployed out there, these modest gains in corporate profits or jobs aren’t doing anything that running out of energy see. The thing is, companies which have been making do with lean staff rolls within the last two years to restore through the recession, have somehow found this type of efficiency addicting. They don’t wish to hire anyone if they are getting along this way. In fact, considering that the recession isn’t completely over, if anything, they are shedding still more jobs. The country actually lost 30,000 jobs in February. What does the IRS think people do when things are so desperate? For whatever work they can find, will people like to get full disclosure and pay taxes, or would they like to put a little by, picking up a little unreported money on the side and withholding tax?
There are lots of ways they can do this. If it isn’t toiling away at another job on the side, it may be getting a job and still claiming unemployment benefits. Whatever way you’re doing so, if you keep part of your income off the books by accepting your pay in cash, chances are pretty high that the IRS will somehow get wind of this. As has been reported again and again, they have been pumping it up at their enforcement department and are better equipped now than in the past at finding out anyone trying to get by withholding tax from them. Should you not declare all your income, you’re just setting yourself up possibly, for many penalty pain, and missing out on a variety of benefits too. Let’s draw a picture of all that is involved, shall we?
The majority of workers who have been withholding tax for a while, can simply wipe the slate clean by putting in a late tax return, or alternatively, filing an amended tax return for an earlier incorrect one. If you don’t have your paystub or a W-2 form, you can just make a reasonable guess, and you’ll be spared. And what about those penalties? If you pay your taxes late, you owe the IRS .5% of your taxes due each month; and then you have the late filing fee too. Frequently, you’ll end up paying them more than you make. However, if you are caught before you throw yourself on the IRS’ mercy voluntarily, you could owe twice what you make that year. Except if, the IRS feels in some specific case that there are mental illness involved in the desire to be withholding tax. And in addition, whatever unemployment benefits you received, you owe the government those back too.
Long-term, there are lots of adverse outcomes that withholding tax can have on your quality of life. To start with, you put your Social Security benefits at risk; and should you need disability benefits later on, those become very difficult too. To actually qualify for Social Security benefits, you’ll want to have worked and paid Social Security taxes for at least 10 years. And if you work fewer than 35 years in your life, that decreases your Social Security standing.