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Thread: Should I let it go?

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    Member torchemily's Avatar
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    Default Should I let it go?

    Before I was a stripper I had another job that was also classified as self employment. I was young and knew little about taxes, especially self employed tax. So for my first year I went to an accountant that my friend recommended to help me file. Well, when all was said and done, I made under 20k for the year, and owed the IRS 8k. My accountant told me that, "If you are self employed, the gov't basically takes 40-50% of every dollar you make." I got out of this line of work, partically because of this. Then when I started stripping (about 2yrs now), I refused to pay for the first year 1/2 because I couldn't afford to give 40-50% of my income to the gov't. Today I saw a financial advisor to talk about money management, and also to help me plan for taxes (b/c I really don't like not paying). He showed me a chart stating that until I make $32,500/yr, I only pay 15%! So, as you guessed, I told him about my $8k check that I had to write to Uncle Sam because my accountant told me I owe 40-50% of every dollar. Of course he agreed that, that didn't sound right at all. If I would have not been given false information by a licensed accountant, I would have never dodged taxes! In an addition, what about MY money? I don't know if it's even possible to get any back. Also, b/c for the past year 1/2 I haven't been honest with the gov't, it may just draw in more red flags. But, like I said, I only dodged taxes because I was given wrong information by a license accountant. I also even quit this job partically b/c of her. What should I do? I was lied to! If Uncle Sam ever decided to come down on me for the last year 1/2, would he even care about the lying accountant? Would Uncle Sam even remember the $8k check?

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    Banned Melonie's Avatar
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    Default Re: Should I let it go?

    I'm certainly not an expert ... but ...

    self-employed persons do have to pay a 15.3% Social Security and medicare tax regardless of the amount of income earned. So if you earned $20k, about $3,000 will be due for this 'self-employment' tax.

    the chart that the financial adviser showed you was probably referencing income tax ... which is a different tax altogether even though the IRS collects both taxes at the same time. If you earned $20k, the amount of income tax you owe after exemptions and deductions is probably very low.

    Up to the point where the IRS audits you, it's possible to file an Amended tax return for previous years. Thus if you want to 'straighten out' your tax situation for last year you are still able to do so.

    You are also correct that, if and when the IRS audits you, anecdotal stories about being given false information by a licensed accountant aren't going to mean much.

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    Senior Member Blackstone's Avatar
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    Default Re: Should I let it go?

    Quote Originally Posted by Melonie View Post
    I'm certainly not an expert ... but ...

    self-employed persons do have to pay a 15.3% Social Security and medicare tax regardless of the amount of income earned. So if you earned $20k, about $3,000 will be due for this 'self-employment' tax.

    the chart that the financial adviser showed you was probably referencing income tax ... which is a different tax altogether even though the IRS collects both taxes at the same time. If you earned $20k, the amount of income tax you owe after exemptions and deductions is probably very low.

    Up to the point where the IRS audits you, it's possible to file an Amended tax return for previous years. Thus if you want to 'straighten out' your tax situation for last year you are still able to do so.

    You are also correct that, if and when the IRS audits you, anecdotal stories about being given false information by a licensed accountant aren't going to mean much.
    For what it's worth, good faith reliance on a tax attorney or CPA, along with a willingness to pay any arrears, is an affirmative defense to criminal tax evasion. The problem is "I got shitty advice so I decided not to pay anymore" is probably not good faith reliance.

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    Member torchemily's Avatar
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    Default Re: Should I let it go?

    The thing that sucks is that $8k check I know would to cover all, if not close, to the yr 1/2 of tax. But will the IRS care? NO! Why didn't they notice THAT mistake?
    Some of my friends have told me to look into suing the accountant. But to be honest, I'd rather focus getting my taxes in order than trying to ruin someone's life. And since I know the real percentage now, it shouldn't be too difficult to take care of. Hey, what's writing one more $8k check?

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    Member torchemily's Avatar
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    Default Re: Should I let it go?

    last thread jack, I promise.
    So I have spent all day configuring my income for that yr 1/2, and have gone through all of my receipts (I always kept them whether I was paying or not, incase I was audited). Although I'm not quite finished, I have a pretty good idea of what the IRS bill will be. THANK GOD I'm a penny pincher! I will meet with a different accountant next week just to verify that my ducks are in order. I must say that it feels real good to get this all taken care of. Plus, doing all of this work has made me learn soooo much. I'm starting to understand the "tax language." And to be honest, once you start to understand how things work, it's really not that difficult. Definitely glad that I'm getting this taken care of.

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    Banned Melonie's Avatar
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    Default Re: Should I let it go?

    ^^^ you're correct that once you start to get the 'hang' of filing a Schedule C, a Schedule SE, and a 1040, things aren't as bad as they first appear.

    Actually, TurboTax for Home & Business (as well as other tax software products that can handle Schedule C), makes filing your own tax returns a manageable task. However, for the first year at least, it is often worth the extra money to use an accountant ... because you will want to make some decisions in regard to business expense tax deductions, SEP-IRA's, perhaps even LLC or corporation, which a good accountant can help advise about.

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