Should I not pay taxes if I am paid with personal checks, and my employer does not report them?

Question

I am paid with personal checks, so I suppose technically I am an independent contractor. No taxes are taken out of the checks, so I have been saving 30% of each that I receive for taxes. I know it's risky, but should I not pay taxes for the personal checks I have received if my employer does not report them? Would the IRS bother me (anytime soon) for $7000? I figure if they come after me years later, I can just negotiate and get on some sort of payment plan then. I really would rather use the money I have saved up to pay off my credit card debt. WaMu and Citibank have to be worse than the IRS, right?

Answer 1

always pay your obligations sooner or later you will want something back and it won't bother you later that you did the right thing

Answer 2

Of course your employer is reporting the pay he gives you. He is deducting every dollar as contract labor. His checks show that the payments went to you. It would be a simple matter for the IRS to determine what you have been paid.

You should file your taxes and then you won't have to find out if the IRS is worse than your other creditors. You should pay your creditors as well.

Oh, and if you have not filed your taxes, you cannot negotiate any kind of settlement. If you are unable to pay your taxes after you have filed, then you can enter into a payment plan, which will include interest and penalties.

The IRS can see that you have been issued those checks, so it is doubtful that you would get any deal from them even if you filed on time.

You can get a good idea of exactly how much tax you will owe right now. A tax preparer would do that for you. Then you will know how much is left for other purposes.

Answer 3

Whether or not your employer reports what they paid you or not has no bearing on whether or not you should pay your taxes. That is a separate issue. According to the IRS, you owe taxes on "income derived from any source". You have planned well for this by saving the 30% that you mentioned. Do file your tax return and if you need to, get someone like H & R Block, or another professional tax preparer to help you. If you are still doing contract work for this, or any other employer, you might want to look into paying quarterly estimated taxes. As to the credit card debt....pay the taxes first and then tackle that. Maybe you won't owe the whole amount that you have saved for taxes and you can start by using what is left on the credit card debt. You do not want to get crosswise with the IRS. Hope this helps.

Answer 4

Fourth time today I have posted this. (One has even made it to best answer in just a few hours.)

I have a canned explanation to apparently clueless independent contractors:

Some employers try to get around paying employment taxes (social security and unemployment) and other employee benefits like workers compensation insurance by improperly classifying employees as independent contractors. The basic issue is the amount of control the employer has over the worker. If you are required to show up for work--personally--at a particular time, punch the clock, use the employers equipment and are paid an hourly rate, you are an employee. If you didn't understand the difference when you posed your question, I would be even more convinced that you are an employee. What is your preference, Slotted or Phillips? Complete an IRS Form SS-8 to get an official ruling on your status. This will help you get unemployment if you get fired. When you file your income tax return, you can attach Form 8919 Uncollected Social Security and Medicare Tax on Wages and only pay the employer's half of social security. You will still have to cough up all the income tax. IRS and the states are stepping up enforcement in the abuse area.

Answer 5

No No. The IRS can sell your home and your car and your clothes and your jewelry to pay off your debt. Citicard can just put some bad mark on your credit that will disappear in 7 years.
You MUST claim taxes for anything you make over $600.
If you do not, you are cheating all of us (American Citizens) out of our Social Security, Medicare, etc.
Your employer will surely get busted, and as a result, so will you.
Trust me, you owe more than 30% of what you are being paid.
I would guess you owe at least 40%.
I was self-employed for three years. It is a rough road.

Answer 6

The IRS is far worse than any other creditor - they have much more power and are utterly relentless. A good tax attorney might be able to help you get the debt reduced or set up a workable payment plan, but sooner or later, they will make your life miserable until you pay.

Answer 7

You are paid as a contractor. You will have to pay your own tax's SS and fed tax. Your right about the credit people , they are two of the worst.

Answer 8

They might catch up to you sooner than you expect. And when they do you'll owe a lot more that you would have if you'd paid what you legally owed in the first place. And in the meantime you'd be guilty of tax evasion.

Answer 9

How do you know your employer is not reporting them? To him/her, its a business expense. You are being set up for a big fall if you don't pay taxes.

Answer 10

Yes pay them ! If you are an independent contractor you are still responsible for your taxes. also dont forget your tiths
The BIBLE says pay Ceasor (the government) what is due him and pay GOD ( the church) what is due God.
If you follow these simple rules I Promise You will have a much Richer Life.

Answer 11

The I.R.S. is far worse than WaMa and Citibank. You do not want them on your case.They never give up and have far greater powers to collect than any other of your debts.

The I.R.S. is similar to the Gestapo under Nazi Germany.