Quote:
Originally Posted by KCJoe
To invest in an ira, you have to have earned income. Even though it is deductible, you'll still have to pay self-employment tax. And if you live in kcmo, they want their 1%. I've been putting funds in a vanguard target retirement fund. The closer you get to your retirement age, the less risky the investments are.
if you're going to invest undeclared income. You'll want to make the deposits small enough to not attract unwanted attention. If your declared income is low enough, or you have a dependent, you might get your s/e tax back thru the earned income credit. As others have suggested, it would be better in the long run to file and pay as you go. Also I believe the irs is prohibited from sharing information. Unless maybe the fbi. But if they are looking at you, you've got bigger problems.
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Good comments.
The name of the game is to always file and pay some tax. Therefore, you are on record for paying. Once you have a larger income it is difficult to hide income and all of it should go to the bank - nothing is held back from the bank because if you are caught there is hell to pay.
That being said, with a larger cash flow, there are many ways to spend it, or invest it, to make the money go away prior to tax season. Expenses can include: health care, auto expense, travel expenses - such as hotel, office expense. retirement contributions and phone expense.
By the time you take away all of the expenses you could be claiming, and are not, there may be no income left.
The IRS has made corporations big tax collectors for the workers. To be incorporated means you have paperwork that must be done.
But the work can be made easier. For small companies, you still have to do all the paperwork as the big guys. There are many payroll services, such as Paychex, that handle all of the paperwork for you. Just call them for payday and they do all the work and send you a check less the taxes. It is easy. Plus with a corporation (including LLC or an S corp. which winds up on your 1040 as a loss or credit to your personal taxes) you can open a bank account in the corporation name. Establishing credit is important to maintain for both the corporation and the individual. It allows cash deposits in the company name, and credit cards in the company name. But you
MUST pay everything on time, every time. NO screwing around with your credit. Thus, a corporation is better than a schedule C (individual business expense) attachment to your 1040.
Remember, you need two bank accounts and two credit cards minimum: a business & credit card, and a personal account and credit card to deposit you paycheck and pay personal bills. Keep personal and business money separate. Business pays for business expenses. The personal pays for your house payment, grocery bill, etc.
If you can do arithmetic, simple book keeping is easy to do. Unless you are totally stupid, or don't give a dam, it just takes the discipline to do it.
Some people are just too lazy to learn, and they are stuck for life with a hand to mouth existence. You need records on what you do, so you can do better; but you don't have to show everything to the government: that would be stupid. Some people call it a second set of books just for you. You should have notes on every person who does business with you, preferably on a data base file such as Filemaker Pro (Windows or Mac) which you can program yourself and includes secure password protection.
I know to the penny every customer that elected 40 years ago to pay privately for consulting. Today, with computers, it is much more difficult. But, I have a professional set of books with everything done right.
The IRS knows that in the sub economy (known as the black market that doesn't pay taxes) a lot of taxes slip through the cracks. So, pay your taxes and you get to deduct your expenses.
JR
My Bio Page - Colorado - Denver
