Would You Consider This Tax Evasion?

[Zelig]

Pretty easy to sell such cards on eBay or friends. I bought a $500 Whole Foods card from him for $420 I think.

He mostly sells stuff on the Internet so I don't think he deals with many "real businesses".

So he sells stuff on the internet to non-companies in exchange for gift cards which he can only sell for ~85% of their value?

That seems like far more effort than just doing a job for actual money.

 

[Timsup2nothin]

So he sells stuff on the internet to non-companies in exchange for gift cards which he can only sell for ~85% of their value?

That seems like far more effort than just doing a job for actual money.

If by 'doing a job for actual money' you mean getting a paycheck with associated income reported via W2 or 1099 there may be very good reasons not to do it. I don't mind doing the occasional job for cash money, but I have no interest in having my name appear on any IRS documents. If it appears on one they start expecting full sets.

 

[Birdjaguar]

Like I said earlier. Buy a copy of Turbo Tax; fill out the income section accurately. It will tell you how much tax you should owe before deductions. Then go back and raise your self employment earnings and see what impact it has on your taxes owed. It is easy to use and walks you through all the various entries for every income type.

 

[cav scout]

Umm... no. Sorry, you're wrong. What I said is no way hypocrisy. The difference is that he volunteered for military service. I didn't volunteer to pay income taxes, the government takes them from me by force via threats of imprisonment. And once they do take them, I get no say in how they are spent. You can feel free to fawn over the military all you want, but don't act like I'm obligated to do the same.

You did volunteer to pay income tax by working. And the reason we don't have conscription is because enough people are willing to volunteer for military service. You have a selective service number right?

And by the way, your ad hominem attack of saying that I "lacked the civic virtue" to join the military is ALSO wrong, surprise surprise. I didn't lack anything, the military was never even an option for me because I'm epileptic and epilepsy is an immediate disqualification from military service. So feel free to stop talking out of your ass as if you know anything about me.

Well if you lacked the neurological soundness for military service then fair enough, you have an excuse. Did you consider another option for service?

Lastly, in terms of the tax issue, you're completely misrepresenting what I said. I didn't say that his VA benefits should be taxed. I have no problem with those being tax free. What I said is that they should count as normal income for the purposes of determining his tax liability on his other (taxable) income. So to pull numbers out of thin air, if his VA benefits are 25K annually, and he's making 25K from working, that 25K that he makes from working should be taxed as if he is in the 50K tax bracket. Don't tax the first 25K, but look at his whole income when determining how to tax the second 25K. When I say he is circumventing the intent of the system, I do not mean the VA benefits system, I mean the normal civilian taxation system. He is circumventing that system by using a loophole which shows him as technically being below the poverty line even though he is not below the poverty line, because the government simply discards his VA benefits from the equation entirely. Nowhere did I even imply that his VA benefits not being taxed was an abuse of the system, I don't know how you even got that out of my initial post.

Yes, I understood the distinction you were making but you are incorrect.

He is not circumventing the normal civilian taxation system or using a loophole. The civilian taxation system intentionally counts some income for tax purposes while other income is not taxable and not considered for tax purposes.

Have you ever had a scholarship? This is income, but just like VA compensation it is not considered for tax purposes. The government just discards scholarship income entirely from the equation. On purpose. This is not a loophole and not an abuse. It is how the system is intentionally designed.

Now someone could make an argument that college students should start paying their fair share and have their scholarship income considered for tax purposes. But it would be wrong to accuse students of using a loophole and abusing the system.

Does this make sense? Reread the wikipedia entry on Loophole if you still can't understand this.

 

[Lohrenswald]

I think you're doing tax evasion, Commodore, granted that the following is correct:
If I remember correctly, you have a progressive tax system. As in the tax rates for people earning less than 100 dollars apply to the first 100 dollars anyone makes. And if the poor don't pay tax I would assume a the first few dollars are tax free. It wouldn't make sense if being just above the poverty line meant you had to pay taxes that left you with less money than someone just below the poverty line that doesn't have to pay taxes.

If this is true, your situation seems to be so: the money you get at this point should be tax-free anyway, and you make sure too work just not enough to pay taxes. Like, I get an impression that your goal isn't to save money, but rather to not pay taxes.

 

[Narz]

So he sells stuff on the internet to non-companies in exchange for gift cards which he can only sell for ~85% of their value?

That seems like far more effort than just doing a job for actual money.

There's a certain satisfaction to working for yourself & making money in weird ways. Work is only work if it sucks. If you enjoy the extra legwork & the story you get from it its not really work.

 

[Borachio]

I've dropped sufficiently out of documented existence that I can't get audited...but I always wondered what they would say if you sent in a tax form with "I have no idea" written in the block for "wages, salaries, tips, etc". I mean, is it a law that you are actually required to keep track of that stuff?

I don't know how it works in the US. But in the UK if you don't keep meticulous records while running a small business, they send round a tax assessor who will just make a guess about how much your in-goings and out-goings are, based on the look of your premises. It's usually a better idea to have meticulous records. Or at least records which give the impression of being meticulous.

 

[Harv]

First thing's first: In the scenario I am about to describe, I am not interested in whether or not the law says what follows is tax evasion (I'm pretty sure it's not); I am interested in whether or not YOU would consider it tax evasion if you were the one making the rules.

Okay, so here's the situation: A majority of my current income is non-taxable. It comes from a combination of the living allowance from the GI Bill and VA disability compensation from an injury I got in the Army. Both sources are completely non-taxable and are enough to cover all of my household expenses. I am currently self-employed though, and earn enough money to build up a nice little savings that I can eventually start investing with.

Anyway, since I am self-employed I don't pay any taxes throughout the year and would normally pay when I file my tax return forms. Well, to avoid paying those taxes and keep all the money I make, I am intentionally throttling my income to ensure I stay below the poverty level. From what I have read, people with a taxable income level that is below the poverty level will end up having to pay $50 at the most. Keep in mind, I am not being dishonest with the government about how much I earn, I'm just intentionally earning less than I could to avoid paying taxes. To sum it all up, I currently have a total income level that is well above the poverty level, but most of it is untaxable, and the amount that is taxable I am deliberately keeping below the poverty level, so as to effectively make that amount untaxable as well.

So, if you were the one in charge of tax policy, would you consider intentionally remaining below the poverty line to avoid taxation as a form of tax evasion? If so, should there be penalties for people like me who engage in such a practice?

No. You are completely playing by the rules. You are choosing an income level that gives you a minimal tax liability. I see no fraud in what you are doing.

You can call this "tax avoidance," but this is not the same as "tax evasion." An example of tax evasion might be, since you are self-employed, getting paid under the table and not reporting the income, especially if it is a lot of money this way.

This is also from some random moron on the internet - and one who does not even do his own taxes.

 

[Zelig]

Like I said earlier. Buy a copy of Turbo Tax; fill out the income section accurately. It will tell you how much tax you should owe before deductions. Then go back and raise your self employment earnings and see what impact it has on your taxes owed. It is easy to use and walks you through all the various entries for every income type.

I'd recommend against TurboTax based on the scumminess of Intuit, doesn't America have anything like StudioTax?

 

[warpus]

If by 'doing a job for actual money' you mean getting a paycheck with associated income reported via W2 or 1099 there may be very good reasons not to do it. I don't mind doing the occasional job for cash money, but I have no interest in having my name appear on any IRS documents. If it appears on one they start expecting full sets.

Seems like you are severely limiting your employment options by refusing to for some reason file anything with the IRS. Doesn't that put you at a huge disadvantage, not to mention possibly biting you in the butt later?

Why put yourself in such a perilous situation? I just don't understand. Do you have a secret past of some sort or something, and you don't want them finding about the lottery you won under a different name?

 

[Zelig]

Seems like you are severely limiting your employment options by refusing to for some reason file anything with the IRS. Doesn't that put you at a huge disadvantage, not to mention possibly biting you in the butt later?

Why put yourself in such a perilous situation? I just don't understand. Do you have a secret past of some sort or something, and you don't want them finding about the lottery you won under a different name?

Timsup2nothin does not have an employment situation comparable to most people.

 

[warpus]

Exotic dancer? Secret agent? Freelance sumo wrestler?

 

[Wolfbeckett]

You did volunteer to pay income tax by working. And the reason we don't have conscription is because enough people are willing to volunteer for military service. You have a selective service number right?

Oh come on. You know full well that that isn't a real choice. "Do this or starve to death" is not a choice. If a citizen presented another citizen with that "choice" they'd go to jail for extortion. The government form of extortion may be necessary for a functional society, but it's no more of a "free choice" than the non government form. And of course I have a selective service number, for the same exact reason. You can't get a driver's license without registering for it, and here in Southern California, if you can't drive, you can't work unless you want to make a career of cashiering at the 7-11 3 miles up the road.

Well if you lacked the neurological soundness for military service then fair enough, you have an excuse. Did you consider another option for service?

No. As I understand the rules, in order to enlist for any military role with epilepsy, you have to be seizure free without the use of medication for 5 years, which I wasn't, I was on medication until I was 20, and by the time I was 25 I was already working and had no reason to just drop my entire life to start over.

Yes, I understood the distinction you were making but you are incorrect.

He is not circumventing the normal civilian taxation system or using a loophole. The civilian taxation system intentionally counts some income for tax purposes while other income is not taxable and not considered for tax purposes.

Have you ever had a scholarship? This is income, but just like VA compensation it is not considered for tax purposes. The government just discards scholarship income entirely from the equation. On purpose. This is not a loophole and not an abuse. It is how the system is intentionally designed.

Now someone could make an argument that college students should start paying their fair share and have their scholarship income considered for tax purposes. But it would be wrong to accuse students of using a loophole and abusing the system.

Does this make sense? Reread the wikipedia entry on Loophole if you still can't understand this.

You're the one who brought up the concept of "intent". I say he is abusing the system because the intent of not having your first X dollars of income taxed is to help people that are living below the poverty line by not burdening them with extra financial hardship. This situation does not apply for Commodore, he says himself that he is living well above the poverty line. What he is doing is not illegal, but it IS gaming the system, utilizing a tax policy that was never intended to apply to people in his situation, in order to avoid having to pay anything.

And for the record, I did have scholarships, but they were for community college and were therefore not high enough to take me above the poverty line in any case, so they would have been tax exempt even if scholarship money was taxed. But the scholarship thing is not an apples to apples comparison to Commodore's situation in any case, because students living off of scholarship money are using it in exactly the way that the scholarship tax laws intend. The intention of those exemptions is to help people graduate college, presumably get better, higher paying jobs as a result, and ultimately end up growing the economy and paying more in taxes over their lifetime than they would if they just went straight in to the workforce. Students using scholarships to do just that are well within the intent of the law. Commodore's situation is completely different than that.

 

[Timsup2nothin]

Exotic dancer? Secret agent? Freelance sumo wrestler?

Homeless guy. Hence I don't worry much about them sending someone round to inspect the premises.

 

[warpus]

Homeless guy. Hence I don't worry much about them sending someone round to inspect the premises.

How do you have access to the internet and all that jazz? For now I'm going to choose to believe that you are a secret/freelance sumo wrestler.

 

[Timsup2nothin]

How do you have access to the internet and all that jazz? For now I'm going to choose to believe that you are a secret/freelance sumo wrestler.

I keep a desktop at my girlfriends house, and the number of places with free wifi for my laptop is almost without bound.

I'm pretty big, but sumo wrestler is beyond me for sure.

 

[warpus]

Can I ask why you've chosen this sort of life for yourself? You're trying to stay off the grid for some reason? Of course I suppose if you were, you wouldn't say so publicly.

 

[Borachio]

He's keeping a low profile. Simple as that, Mr Soup.

Nothing to be ashamed of in keeping a low profile. It's even supposed to be quite a tax efficient life style choice.

 

[warpus]

"See that guy? Why is he keeping such a low profile?"
"Huh.. You're right. Hasn't ever filed anything with the IRS"
"Maybe he's a secret agent?"
"Or a sumo wrestler"
"Yeah, something like that. We definitely have to tell Steve about this."

 

[Borachio]

Actually, I have a pretty good idea why. But I'll leave it to Mr Nothin to tell you. Or not.