Quote:
Originally Posted by Charlie T
Your little disclaimer means nothing, that is a Damn insulting comment. What is your problem?
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Google "cash businesses and tax evasion" there will be a wealth of articles. I'm sorry but that is what I think when I see a cash only business. Again, some firms that take cash only pay ever last nickel of taxes. However, that isn't the norm. The below is a good overview.
There are two ways to underreport income. The first is to tell the Internal Revenue Service (IRS) that you made less money that you did during the tax year; and the second is to claim more deductions, exemptions and tax credits than you really deserve. Underreporting of income is the single largest contributor to the tax gap, making it America's favorite form of tax evasion. More than 83 percent of the $450 billion tax gap, or $376 billion, is attributed to underreporting of income [source: Internal Revenue Service].
Who is most likely to underreport income to the IRS? According to the non-compliance statistics from 2006, individual filers -- not corporations -- are the biggest tax evaders, underreporting income by $235 billion, equal to 52 percent of the total tax gap [source: Internal Revenue Service]. Interestingly, the biggest culprits among individual filers are folks who own their own businesses. Underreporting of business income accounts for $122 billion missing from individual income tax returns, while non-business income -- normal wages and salary from a job -- only add to $68 billion of the tax gap [source: Internal Revenue Service].
Wage and salary employees are more likely to pay their full income tax bills because their earnings are regularly reported to the IRS by a third party: their employers. Employers are required to withhold Social Security and Medicare contributions from each employee paycheck and hand that money over to the feds throughout the year. When an employee receives a W-2 in January, he or she knows that the IRS receives an identical copy. That's why only 1 percent of wage and salary income was underreported in 2006, while folks with no third-party reporting requirement — like self-employed workers or sole proprietors of small businesses -- had a 56 percent underreporting rate [source: Sahadi].
Jobs that pay primarily in cash are ripe targets for tax evasion. The IRS estimates that waiters and waitresses underreport their cash tips by an average of 84 percent [source: Nolo]. Cash doesn't leave a paper trail -- check stubs, deposit slips, invoices and the like -- that can be tracked by IRS investigators. If an employer pays a worker "under the table" in cash, it means that the employer doesn't have to pay unemployment tax or payroll taxes for that employee, and the worker can easily get away with not paying income tax on those earnings.