If you're paid in cash and aren't claiming all of your income, not only are you risking a huge amount of penalties, you're also losing out on a lot of the benefits. So what do I mean by that, besides social security?
What happens when the person who paid you in cash is the target of audit?
If someone who is paying you is the target of an audit, it is likely that they are going to spill the beans. Otherwise they will not only have to pay taxes on what they paid you, but also onerous serious penalties. And then after they point the finger at you, what do you think the IRS will do with that information? Send you a Valentine?
What happens when you don’t get paid? What proof do you have that you had a job?
If you’re on a cash-only basis you have no recourse if your employer decides not to pay you. In that situation, you are stuck. If there is something in writing, then that person can blackmail you with proof showing that you evaded taxes.
Has your spouse ever signed a return joint with you?
By not reporting your income, you’ve make them liable for all your unreported income.
Do you like asking people to co-sign a car loan for you?
Even if your credit is good you will not be able to verify your income if you’re paid in cash. If bank cannot verify your income, you won’t get a loan by yourself. No loan means no car, so you better beg your mom to co-sign if you want a car. And a home mortgage is now out of the question
Transcripts are required for an increasing number of jobs.
It is not uncommon for potential employers to have you sign a 4506-T form. This is especially relevant for higher paying jobs. If a potential employer has a 4605-T signed by you they have the ability to see what you’ve been making and see if you have been honest, an important quality to most employers. And then how are you going to justify a 6 figure salary when a prospective employer sees that you've never reporting income that close —ever?
By taking cash payments to avoid paying income tax you are sending a daily message to yourself that you will always be too small of a fish for the IRS to care about. You are telling yourself that you are going nowhere.
If you need help with an audit, or getting into compliance, contact us at 888-727-8796 or email firstname.lastname@example.org.