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Thread: What to do in this cash business

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    Default What to do in this cash business

    Hi everyone, I'm wanting some advice about the cash aspect of the business.

    So, here's some background: I'm a teacher with one adopted and 3 fostered special needs children. Over the summer, my husband (also a teacher) and I take the kids on working trips all over- they love it, and I have been able to make us a lot of extra money. During the school year, when we are both working, we try to pay most of our bills with the cash I have saved up over the summer- and just deposit our paychecks.

    Now... I don't claim my cash and I don't dance where I would need a license. If the school board knew what I do, I would be in trouble to say the least. My children also receive help from the state through the early intervention program- they get speech, occupational, physical, and feeding therapy funded by the state. And, if I claimed all the money I actually made my kids would no longer have this opportunity. Even though I do make a lot of money, I don't make enough to support all the services the kids need.

    After paying our bills, we have a pretty significant amount of cash saved up. What do you all do with the cash you have made? Can you put cash in a C.D.? After your bills are paid.. what now?

    Thanks all

  2. #2
    God/dess shasta's Avatar
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    Default Re: What to do in this cash business

    Seems like this will eventually catch up to you. If both of your salaries are just being deposited and you mortgage/rent/bills are all being paid...

    Idk know what others will say. But stay away from making really big purchases that could be reported to the IRS. You will have to claim money that you put in a CD. You are already putting a lot of money in the bank... I wouldn't put this money in the bank, too, unless you are going to claim it.

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    Banned Melonie's Avatar
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    Default Re: What to do in this cash business

    Admittedly, a 'moral hazard' situation does exist in regard to gov't benefit eligibility rules ... where the 'equivalent cash value' of those gov't benefits creates a 'dead zone' in regard to income levels between the point where gov't benefit eligibility is lost and the point where actual after-tax income level is high enough to afford to finance paying for the same things out of pocket. This 'moral hazard' situation actually serves as an incentive for many Americans to refuse overtime work / quit jobs / refuse promotions in order to keep their actual incomes just below the cutoff point for gov't benefit eligibility.

    Nonetheless, the law is pretty clear on this. ALL income must be reported to the IRS. So, technically speaking, your post is basically an admission of contemplating both future tax fraud and future 'welfare' fraud if you choose not to report your cash income on your 2012 tax return.

    Confining further discussion to the 'basics', earlier IRS rules and the new ObamaCare law both exert pressure on all businesses which pay 'independent contractors' in cash to issue 1099 reports to the IRS. Thus if the clubs you worked at this summer were given your real name, real address, and real SS# as part of the 'hiring' process, there is a good chance that 1099 income reports will be issued by those clubs to the IRS next February. This will place you in a position of being forced to declare the income reported via those 1099 income reports on your 2012 tax return, to pay taxes on that income, and to perhaps lose eligibility for gov't benefits as a result of that income.

    If the clubs issue 1099 reports, and IRS computers are unable to find a matching tax return from the person with the listed name, address and SS#, an IRS audit is a virtual certainty. Once such an audit gets underway, with an IRS attitude already established that the person they are auditing has been 'less than truthful' in regard to declaring their income, the IRS could easily examine records of actual bank deposits, checking account / credit card expenditures, rent / mortgage / loan payments, retirement account deposits etc. in an effort to arrive at an 'official' estimate of actual income. This in turn could result in IRS assessment of additional income taxes and penalties. It would also almost certainly result in the IRS and/or your state income tax agency sharing the resulting 'official' estimate of actual income information with the state social welfare dep't.

    If informed that the actual level of income was above the eligibility threshold, the state social welfare dep't would, at best, terminate eligibility for future benefits. There is also a good possibility given the sad state of most state gov't budgets that the state social welfare dep't will seek repayment of the cash value of benefits provided during 2012 for which your actual income level rendered you ineligible. There is also some possibility that 'welfare fraud' charges could be levelled, to serve as an 'example' to others with cash incomes who are receiving gov't benefits based on the non-declaration of those cash incomes. If that were to happen, your teaching credentials could be put at risk since the charges would definitely be brought to the attention of your state's professional licensing agency. This could not only cause problems with your present 'employer', but could also effectively 'blacklist' you from working as a teacher almost anywhere else in the state due to the 'unprofessional conduct' charge added to your teacher's license file.

    Again sticking with the 'basics', at the very least, you might want to consider hanging on to every dollar of summer 2012 dancing cash which you currently have 'stuffed into your mattress' until next March ... at which point you may receive copies of 1099's that will be issued by the clubs you worked at !
    Last edited by Melonie; 09-13-2012 at 02:41 AM.

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    Default Re: What to do in this cash business

    I am well aware of the 'moral hazard' that is set up by this kind of system.. I have SO much to say about that, esp. in regards to the services my kids get. My husband does roofing, painting, etc over the summer when he is not teaching, and files as an independent contractor. I am nervous about filing as an independent contractor because the school board does yearly background checks (we both work in sped). Again, I have a LOT to say about the acceptance of dancers in other professions... but that could be another post entirely. Perhaps I am being nervous.. and I have never been very knowledgeable about tax laws in general. I don't want to quit dancing because teaching makes so little money. Also, my foster kids are so important to me, and I feel more secure knowing that I have a 'nest egg' in case something happens- they all have special needs. I know background checks primarily check for criminal charges, but they have to power to see my employment history and tax history.

    Thanks so much smart ladies!

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    Veteran Member annabellz's Avatar
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    Default Re: What to do in this cash business

    Im not really sure what your question is but I get the general idea of it. What you should do is find out from the club you work at if they issue 1099 forms or not. If they do then you have to report it on your taxes. If you dont, it will be flagged in the IRS computers and you will be audited and then all those things Melonie mentioned above about them going through your accounts and possibly prosecuting you for fraud could happen. (however you should be aware most clubs do issue 1099s with discreet names on them for your privacy like Frontline Services Inc rather then Topless Joes Tit Bar) The club should be able to tell you if they issue 1099s and what name will appear on it.

    The law does say you are suppose to report all income you receive, if youre a dancer that means youre suppose to report all tips you receive but in reality it comes down to honesty. If you report you received 5k in tips but you actually earned 10k in tips no one will know except you. you could open a CD or savings account, but if you are ever audited they will want to know where that money came from. Also when you apply for welfare benefits having large savings could impact your ability to qualify.

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    Default Re: What to do in this cash business

    Background checks can mean many different things. But, what they don't mean is getting a look at your tax returns unless you sign an IRS Form 8821. Then, the IRS will only give up the return, not the supporting documents. It takes a subpoena issued by a court for a criminal investigation to get that type of information. Thus, it comes down to what your schedule C says is your industry code. Dancers use the same industry code as actors so if your school is going so deep in a background check as to get your 8821 then they are doing a very thorough check. Yet, so far they do not know about your dancing?

    Z

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