Worst case scenario if you claim jack squat
Just pondering a hypothetical situation ::)
Married couple to file joint return. Spouse claims all earned income. Dancer claims nada but essentially earned more than Spouse. Couple receives refund but should owe if they filed properly.
Ok, so what are some plausible reprecussions that can happen to couple? If couple seperates will they both be liable *if* audited or just the dancer?
Re: Worst case scenario if you claim jack squat
Since both people signed the return then both would be liable. The way that the IRS usually finds out, is when the couple is living beyond their reported means. Chances are in your favor that they will not find out, however, if the do then the IRS has pretty stiff penalties.
Re: Worst case scenario if you claim jack squat
Well, it depends.
What happened to all of the money that the dancer earned in the last year? Was it used to buy a home (down payment), new cars, pay off credit card debt? Was it socked away into an interest bearing account?
The reason I ask is because if you did any of the above with the money that was unclaimed last year...and you did not "account" for that money anywhere in the taxes, there is a very high chance that you will trip an audit. Why? Because when you buy a home, cars, or put money into an interest bearing account, the banks that hold those loans (and the writing off of RE taxes/interest) send a form to the IRS advising them that so-and-so with SS# of_________ bought this, this, and this and these are their payments and this is how much they made on the money they have in this interest bearing account.
Now, if the husband/partner made $60,000 (before taxes) last year and bought a $300,000 home, a new car (or two), and managed to save $20,000...well, Uncle Sam will send an IRS agent over who wears the biggest shoe in the office fully equipped with a steel toe. I would also like to add that the IRS does not budget for KY.
If you worked at a club that you have had to give your info at (drivers license and SS card)...chances are that they reported SOME of your earnings...even if you never got a 1099 from them.
Hypothetically, nothing will happen...you can move the money to an off-shore account and live out your retirement in blissful happiness sipping away at a frou-frou drink.
But, chances are, if you spent that money, you are taking a major risk of getting audited. And, once you prove to the IRS that you were purposefully hiding money...they'll slap you with fines and penalties along with THEIR version of what you owe...and then they'll scrutinize all of your past returns AND your future returns.
Re: Worst case scenario if you claim jack squat
actually, in a worst case scenario, there's the possibility of being sentenced to a year in the slammer for willful tax evasion. But this is almost never done as long as the person who was discovered under-reporting their cash income during an audit agrees to whatever the IRS proposes in the way of back tax bill plus penalties plus interest. However, as happened to some NY dancers, it's entirely possible that the IRS will 'estimate' that the dancer earned twice as much cash income from dancing as they actually did - with the dancer left with absolutely no credibility and absolutely no form of official documentation to disprove the accuracy of the IRS income 'estimates'.
Re: Worst case scenario if you claim jack squat
Quote:
Originally Posted by
Melonie
it's entirely possible that the IRS will 'estimate' that the dancer earned twice as much cash income from dancing as they actually did - with the dancer left with absolutely no credibility and absolutely no form of official documentation to disprove the accuracy of the IRS income 'estimates'.
Yeah, I suppose this could really screw a person in terms of applying for housing, business loans, etc since it would reflect on debt/income ratio.
Ok, another spin on this scenario. Is it going to flag the IRS when they receive the return and see a $0 earned income on the spouses behalf? I guess I'm curious about their process. Do they punch in the SSN and see that that person has obtained licenses, etc and has been "employed" by clubs? Hopefully, my thoughts and this question is coherent.
Re: Worst case scenario if you claim jack squat
Why not just pay what you owe. Scamming the system will bite you eventually and then the grief they will put you through will cost far more then what you "saved"
Re: Worst case scenario if you claim jack squat
Quote:
Originally Posted by
VenusGoddess
I would also like to add that the IRS does not budget for KY.
LMAO! :D Nor sex toys?
Quote:
Originally Posted by
VenusGoddess
If you worked at a club that you have had to give your info at (drivers license and SS card)...chances are that they reported SOME of your earnings...even if you never got a 1099 from them.
I would think it necessary in order to offset the clubs taxes. Right? And yes, let's assume the dancer never received a 1099, just for shits and giggles.
Re: Worst case scenario if you claim jack squat
Quote:
Originally Posted by
8TJ
Why not just pay what you owe. Scamming the system will bite you eventually and then the grief they will put you through will cost far more then what you "saved"
Not to be crass, but that's not the point here.
Re: Worst case scenario if you claim jack squat
When I worked at VIP's I never got a 1099. That doesn't mean that one was not filed. Sometimes clubs just don't send them to the dancers. Sometimes the PO screws up and the form gets lost in the system. Just because YOU didn't get a 1099, doesn't mean the IRS didn't. KWIM?
The club files the 1099 ESPECIALLY for credit card transaction that happen at the club. Why? Because it's traceable and they have to account for the fact that they only got a PORTION of the money and that the dancer actually raked in the $500/hr. Even if you paid a house fee and tip out and ended up leaving with only 40% of those earnings. You still have to account for something.
Getting a license doesn't mean that you were working. Having the club file a 1099 on your behalf for the money you made off of the credit card transactions (or whenever you turned in funny money) is what matters.
Quote:
Originally Posted by Lola Lee
LMAO! Nor sex toys?
The only sex toys they budget for are usually in the form of the biggest, most painful anal rammers...with no lube.
If that's your idea of fun...by all means...don't report. Although, I would think it would be more fun on your behalf (and cheaper) to just buy those toys yourself and report your income at the same time. Win-win situation all around. ;)
Re: Worst case scenario if you claim jack squat
Quote:
Originally Posted by
VenusGoddess
Hypothetically, nothing will happen...you can move the money to an off-shore account and live out your retirement in blissful happiness sipping away at a frou-frou drink.
:banghead: :embarrass
Duh, I always thought it was "foo-foo":-[
Re: Worst case scenario if you claim jack squat
Quote:
Is it going to flag the IRS when they receive the return and see a $0 earned income on the spouses behalf?
logically speaking, no - the breakdown of income showing one non-working spouse isn't going to attract any undue attention in and of itself.
What WILL draw attention is an amount of reported income that does not jive with automatically reported expenditures plus a reasonable cost of living in the filer's zip code area. As mentioned in a ton of other threads, automatic reporting exists for such things as bank account interest earnings, retirement fund contributions, house and car purchases, large cash or money order transactions etc. - plus the IRS has a nationwide database of typical local prices for rent / sales tax / insurance costs / energy costs etc. for every zip code. The major investment by the IRS to increase their computing power over the past few years, as well as an ever widening network of automatic reporting to the IRS on the expenditure side, now allows their computers to quickly assemble a cash flow scenario for each tax return which can automatically be compared to the amount of income reported on that tax return.
Additional automatic comparisons can be performed by the IRS computers based on the tax returns filed by other people with neighboring addresses, filed by other people with the same 'job code' in the same city, filed by other people with the same employer identification number etc. In other words, if one person's tax return shows a $50k reported income, while every tax return filed with a neighboriing address shows a $100k+ reported income, a 'yellow flag' gets raised by IRS computers in regard to a person living in an 'expensive' neighborhood reporting a relatively low amount of income. If at the same time an automatic report from the state DMV shows the purchase of a new car valued at $30k with a $6k down payment plus a monthly loan payment of $700 to creditor X, plus an automatic bank interest report to the IRS shows an amount corresponding to a $10k increase in bank balance versus the previous year, plus an automatic report from a qualified retirement account administrator shows a $4k contribution to a 401k ... well you get the idea.
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Re: Worst case scenario if you claim jack squat
Quote:
Originally Posted by
Melonie
logically speaking, no - the breakdown of income showing one non-working spouse isn't going to attract any undue attention in and of itself.
What WILL draw attention is an amount of reported income that does not jive with automatically reported expenditures plus a reasonable cost of living in the filer's zip code area. As mentioned in a ton of other threads, automatic reporting exists for such things as bank account interest earnings, retirement fund contributions, house and car purchases, large cash or money order transactions etc. - plus the IRS has a nationwide database of typical local prices for rent / sales tax / insurance costs / energy costs etc. for every zip code. The major investment by the IRS to increase their computing power over the past few years, as well as an ever widening network of automatic reporting to the IRS on the expenditure side, now allows their computers to quickly assemble a cash flow scenario for each tax return which can automatically be compared to the amount of income reported on that tax return.
Additional automatic comparisons can be performed by the IRS computers based on the tax returns filed by other people with neighboring addresses, filed by other people with the same 'job code' in the same city, filed by other people with the same employer identification number etc. In other words, if one person's tax return shows a $50k reported income, while every tax return filed with a neighboriing address shows a $100k+ reported income, a 'yellow flag' gets raised by IRS computers in regard to a person living in an 'expensive' neighborhood reporting a relatively low amount of income. If at the same time an automatic report from the state DMV shows the purchase of a new car valued at $30k with a $6k down payment plus a monthly loan payment of $700 to creditor X, plus an automatic bank interest report to the IRS shows an amount corresponding to a $10k increase in bank balance versus the previous year, plus an automatic report from a qualified retirement account administrator shows a $4k contribution to a 401k ... well you get the idea.
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Exactly.. so if you WERE to lie... the best idea would be to lie WITHIN REASON. ( I can't believe I'm saying this... I don't do it ) If Husband makes 50k and you have 75k worth of purchases/expenses, wife, even though making 200k, should (illegally) claim 80-85k so the money LOOKS like it came from somewhere. Of course, all the leftover money shouldn't be stored in a bank, as that will show up as well.
So if you really really wanna lie, that's the best thing...
If all's said and done.. worst case scenario? Prison. Showing no income is not a red flag.. you're a stay at home wifey is all they'll assume.. unless the money spent is incredibly higher than the money earned.
Re: Worst case scenario if you claim jack squat
Christie's does not report anything.
If you deposited ANY cash into your bank account to pay your bills then I suggest you get out your statements, add up how much you deposited, and then make your deductions from that number.
If you did not deposit any money into your bank account and paid cash for your groceries, rent, etc....then there are a lot of one income households where the husband makes the $$$ and the wife takes care of the baby.