Getting Auditted?- For Accountants!!!?

Question

Was just wondering if anyone believes that someone could be auditted if they recieve 2 checks each week for payment under the table. One check is usually worth 200 and another usually worth 100. I pay no taxes on it but they do come in checks. Think this could be a problem come tax time. It is only $300 a week at most so it really isn't all that much money.
thanks

Answer 1

Of course! Checks = audit trail = audit. And with a potential tax liability of around $3,000.00 or so ($2,300 in self employment taxes and $700 in income taxes) the IRS will have some interest in your income!

I received the following message from the poster:

"Message: Hey,
You just answered the question I put up about the auditting possibility. What are the odds you think of this happening? I am actually an accounting major and I know it is possible for it to happen because it is taxable income that is not getting taxed. My girlfriend babysits and sells baked goods to a coffee shop and gets about the $300 in checks from that. Should I suggest getting that in cash if possible because as much as I believe it is possible, I also believe it is unlikely.
Thanks"

And here is my response to that message:

Both of those activities are likely to include tax reporting by the people she is working for. As such the possibility of being caught is nearly 100% regardless of how she is being paid. If you are an accounting major you'd be well aware of that or you certainly should be.

Your have a fiduciary responsibility to your profession and your g/f to advise her to properly report her income and pay her taxes. If you don't understand this, you should choose another profession that doesn't involve any measure of public trust or professional integrity.

Answer 2

Well, yes, you could not only get audited, but could end up doing prison time for tax fraud although this is very unlikely. The most likely situation is that you'd have to pay not only the taxes that you owed in the first place, but also interest and penalties and a fine. $300 a week over $15,000 a year - not huge money in the total scheme of things, but well over $2000 a year just in self-employment taxes unless you had significant deductible expenses from earning the money, plus any income tax that might be due.

Answer 3

Since you're getting paid via checks, did you receive a 1099 Misc? If so, then the IRS has record of how much was paid to you and good chance that they will come after you. If you didn't receive a 1099 Misc then the only way they will come after you is if they audit the company that paid you since the checks are a paper trail.

Answer 4

For an accounting degree, don't you have to take an Ethics course?

I'm not sure about CPAs (Rules vary by states), but Enrolled Agents have to take an Ethics course every 2 years. And we have to submit to examination of our tax returns every three year at our renewal times.

If we ever failed to report all our income or advised clients not to report all income, we could loose our credentials, be subject to fines and possibly jail time.

My answer to when someone says they worked "under the table:"

"You must be cramped under there!"

There is no such thing as working "under the table" legally.