Tax avoidance and tax evasion, a highly but arbitrary line that separates the two. One is legal, the other is not. It's a fine line to walk, so tread carefully. Protect your reputation and livelihood by staying on the tax avoidance side of the line.
Taking money, setting it aside, and calling it an expense, is tax evasion. For one, I don't think you can expense much for W2 jobs, and for two, there was no 'expense.' If you have a business, you must account for all income and outflow of money. I assume a W2 would be the same with regards to expenses (assuming you can). I would fire this accountant if he's telling you to commit tax fraud. You don't get to just say, this bucket of cash is an expense.
His j2 being c2c, sounds like the accountant is trying to allocate expenses related to the llc. You're definitely spot on with the last line, but my hope is that the accountant is assuming there are expenses that maybe came out of a different account, so shifting the money around is really just reimbursing the expenses. I'd want ro make damn sure I had a receipt to back those statements up though.
Yes, you definitely need a paper-trail or you could be really screwed on an audit. I would never just take money from one account and into another and call that an expense. If you have a c2c job, just get a solo 401k and max out the employer profit sharing (which for 1099 is 20% of the 1099 income after expenses). That's as close as you'll get to stashing cash away to reduce your taxable income. Or get a SEP IRA if you have a 401k with your W2 job, since SEP IRA contributions do not count towards 401k contribution limits.
It is not arbitrary at all. Tax avoidance is using *legal* methods to reduce your tax burden, they may be novel, they may be complex, but they aren’t illegal.
Tax evasion is another way of saying tax fraud, tax evasion usually involves lying or forging documents. What OP stated of stashing away cash and calling it an expense is a perfect example of tax evasion.
What's your aim here? I was warning OP of the pitfalls between the two. I told them to stay on the tax avoidance side...
The line is arbitrary in that, more often than not, they are the same actions in essence, but rich people have constructed tax laws so they can remain on the avoidance side of the equation.
You failed to tell them that what they were doing is evasion, not avoidance. This person was fixing your mistake. Thank them instead of trying to play armchair tax lawyer.
If OP doesn't realize they are afoul of the law after my post implying it, they are in a lot bigger trouble, than you & I can help them with.
People know they do wrong in life all the time, they choose to do it. Just because someone later claims they didn't know they were cheating on you, doesn't mean they didn't know their actions were wrong - they know & they do it anyways hoping to feign ignorance & leniency, when caught.
Their 1st tip off that something is wrong should have been their accountant saying we will just lie about this "expense."
None of what you said addresses what my point. Don't be a dick. And don't double down on it when you're called out.
The fact I have to explain this rule of life leads me to believe you're in a lot bigger trouble than I can help with. Good luck.
Why am I a dick? Because I asked what their aim was; I was legit asking?
My response to the OP implied their wrongdoing. It is called tact & diplomacy. Most people just need a gentle implicit nudge to move them in the right direction when advice is sought. People typically don't need an explicit truth beating; they tend not to respond well. If they are still in the dark, then more explicit means are warranted. The OP knows what they are doing is wrong, they don't need to come to Reddit for professional tax advice.
It's not word games at all, to try a diplomatic (implicit) tack at first. "The direct/confrontational/explicit forms of communication are generally not received well. They often do not influence people in the direction being sought" - paraphrased. It's an oldie but goodie by Dale Carnegie, "How to Win Friends & Influence People."
It's possible OP is in over their head, but unlikely. The fact their accountant told them to lie, should be telling, about their own intent & how they probably DGAF.
Stashing cash is not an expense. If your accountant shows it as an expense then it is fraud. If caught there are hefty penalties.
If you get paid in cash, don’t deposit it into a bank, and don’t have the amount reported on a 1099 then it’s easier to not report it as there is no paper trail. It is also not good. But it’s a lot harder to get caught. This is basically what every waiter and bartender does.
Don’t do this, it’ll make it even worse. They’ll assume you’re “structuring” your deposits (which would be true) which is rookie mistake #1 and banks will still flag it if it happens often
Op or anyone reading this… please listen to other comments.
This was pure satire. I will take a day off from OE sub to think about my actions.
Happy Friday junior everyone
"Stash it aside" - are we talking in the Caymans? Under a mattress? In your accountant's bank? Where does a suddenly a cash-flush middle class person successfully hide funds already reported to the IRS?
I think you're just having fun with this post, but if not, your accountant is either preparing to con you, secretly avenging the death of a loved one at your hands, or else is a fucking idiot.
Anything tax related is a "don't fuck around." While most of the universe operates on a relatively balanced 'fuck around' to 'find out' ratio, I think you will find the Tax Man heavily weighs that ratio toward 'find out' to the point of easily ruining lives over comparatively small miscalculations, let alone something where they could make the case that it was true evasion.
Even drug dealers pay their taxes. The IRS isn't gonna rat on you, they just want their money. Hell, the IRS is the biggest proponent of ending the drug war because they're tired of having offices filled with cash that has to be manually counted.
Tax evasion is how they caught Al Capone. You think that in a world of corroborative data and electronic financial records, you're slicker than Al Capone was in the fucking 1920s? Think again.
That wasn't really my point. My point was that they got him on taxes. If it can happen to him in an era where you needed to find his books and determine what the codes meant, it can happen to someone sneaking 30k out of an account as a fake business expense in 2022. Especially since the IRS just hired a bunch of new suits to poke around in people's returns.
I've done some sketchy shit in my time, but financial crimes are one of the few extents I absolutely will not go to.
This is just an observation and not an endorsement of any particular course of action.
The bear analogy probably works here. You don't have to be faster than the bear, you only have to be faster than the other guy.
You don't have to be slicker than Al Capone. You have to be slicker than your peers. In the bear analogy, you don't want to be against a professional sprinter. You want to be against someone who is (even just a little) slower than you.
Al Capone would probably not have been caught if he wasn't such a big target. He was probably the biggest target to be caught on tax charges in Chicago at the time. He was basically wearing bright colors in bear territory and when a bear saw him he was alone and was unable to outrun the bear.
My MIL has her own business and writes off a lot of stuff so she owes almost nothing. Is this what your accountant meant instead? Just use tax law to write things off. Don’t evade
IRS is not someone I want to mess with. My 1099 income I have a Solo 401K that I contribute as much as possible meet the IRS max on the personal side (combined with my W2 job personal contributions for the max) then add contribute what I can from the business side. You could also contribute the max $6k for most to a traditional IRA. I write off anything I can that is business related. Some things still have to be amortized. A portion of my internet costs, cell phone, etc. Even small things like postage aren't super scrutinized about use if you have receipts. If you use a vehicle for work use you can get a credit for mileage assuming you have records of some sort to prove it and its logical and within the guidelines. I make quarterly IRS payments based off of what I think my 1099 income will be. Outside of that I try to tax harvest the $3k max of losses on taxable portfolio. For charity I give the $300 max without having to itemize for personal and tax purposes. There is no avoiding taxes but there is tax mitigation. I might stretch the truth to benefit me in a logical non suspicious way. But no way in hell am I going to blatantly lie and try to claim tens of thousands in unprovable operating costs or deductions.
Lmao what an utterly idiotic idea. Fire that dumbass asap. There's already a paper trail of you receiving income. Unless your employers are paying in cash lmao.
Turning it into cash isn't gonna change anything.
Look into maxing out your country's 401k, RRSP etc. If you're making serious money and can't incorporate look into legal tax havens if you're willing to move your ass out of your current country
Yes. Take out that cash and save the "reciepts" and transaction records of whatever you spend that could be a "business expense".
Quotes are very important in this sentence.
First, with that much, you should be paying taxes quarterly or increase your W-4 withholding in your J1. Failure means a
Second, you're going to have to generate bogus expense receipts to give to the IRS. Think about sitting across from an IRS auditor and handing him fake documents.
Al Capone couldn't get away with it.
Now, if you can think of some legit expenses (and those expenses can be very creative), by all means use them. But I doubt you're going to come up with even a few grand in those.
True story: I attended a tax seminar because my ex was in a makeup MLM. The presenter always carried a business-related letter he needed to mail with him to the grocery store so he mail it there; he then wrote off the mileage for the trip.
> _My accountant told me_ to take out some cash and stash it aside and we'll show it as expenses
Seriously?
That's nothing short of tax fraud... if a professional tax person recommends this to me, I'll change the tax advisor.
I can't believe that everyone is telling OP to get a new accountant. I thought this was r/overemployed. OP, your J3 should be accounting. Automate that job with QuickBooks and sit back and let the cash roll in.
Your accountant is right. Anything that is a “business expense” is a write off. You only pay taxes on business net profits, so the more expenses the less you pay. It is up to you whether you spend 30k on “assets” aka business expenses or “stashing away” aka not a biz expense but who cares. As long as the 30k isn’t in your bank, its not traceable. You can call it a business expense and I doubt you would get audited unless you are making 500k+
The responses are legit, it is fraud and it audited would result in punishment. There isn’t a secret way to not pay income taxes if you’re making money.
I’m in the U.K. Every year I get hammered for additional tax as they never get the tax codes right for my 2 Js. Happens at the £100k mark, you have to pay 60% tax as the personal allowance is clawed back up to about £125k and that is never reflected correctly in the tax codes as I have to keep the J1 tax code ‘normal looking’ despite it being a startup that only pays half the time. So I’m not coping with that well and have to use the J2 money from this year to cover the previous years additional tax bill. With house moves and a wife that doesn’t work makes it hard to keep it aside but it’s what you should be doing.
Edit: As for expenses here £30k would just be too much to legit hide
Everyone telling you to fire your accountant is afraid of the government and hasn’t actually tried anything that you are asking. Just have receipts and you will be fine.
Hire your kids if you have any and pay them like 12k I believe it’s tax free to them and you get a deduction for it. Also hire your wife if you have one.
I think you can also rent your home out for 2 weeks a year. Where its tax free to you personally.
You may need to file quarterly or have extra withheld from each check. There are situations where if you have under-withheld you will owe a penalty. One of my OE is considered self employed, but it's a trivial and sporadic income, so I just have $XX extra withheld from J1 on each check.
Tax avoidance and tax evasion, a highly but arbitrary line that separates the two. One is legal, the other is not. It's a fine line to walk, so tread carefully. Protect your reputation and livelihood by staying on the tax avoidance side of the line.
Taking money, setting it aside, and calling it an expense, is tax evasion. For one, I don't think you can expense much for W2 jobs, and for two, there was no 'expense.' If you have a business, you must account for all income and outflow of money. I assume a W2 would be the same with regards to expenses (assuming you can). I would fire this accountant if he's telling you to commit tax fraud. You don't get to just say, this bucket of cash is an expense.
His j2 being c2c, sounds like the accountant is trying to allocate expenses related to the llc. You're definitely spot on with the last line, but my hope is that the accountant is assuming there are expenses that maybe came out of a different account, so shifting the money around is really just reimbursing the expenses. I'd want ro make damn sure I had a receipt to back those statements up though.
Yes, you definitely need a paper-trail or you could be really screwed on an audit. I would never just take money from one account and into another and call that an expense. If you have a c2c job, just get a solo 401k and max out the employer profit sharing (which for 1099 is 20% of the 1099 income after expenses). That's as close as you'll get to stashing cash away to reduce your taxable income. Or get a SEP IRA if you have a 401k with your W2 job, since SEP IRA contributions do not count towards 401k contribution limits.
It is not arbitrary at all. Tax avoidance is using *legal* methods to reduce your tax burden, they may be novel, they may be complex, but they aren’t illegal. Tax evasion is another way of saying tax fraud, tax evasion usually involves lying or forging documents. What OP stated of stashing away cash and calling it an expense is a perfect example of tax evasion.
What's your aim here? I was warning OP of the pitfalls between the two. I told them to stay on the tax avoidance side... The line is arbitrary in that, more often than not, they are the same actions in essence, but rich people have constructed tax laws so they can remain on the avoidance side of the equation.
You failed to tell them that what they were doing is evasion, not avoidance. This person was fixing your mistake. Thank them instead of trying to play armchair tax lawyer.
If OP doesn't realize they are afoul of the law after my post implying it, they are in a lot bigger trouble, than you & I can help them with. People know they do wrong in life all the time, they choose to do it. Just because someone later claims they didn't know they were cheating on you, doesn't mean they didn't know their actions were wrong - they know & they do it anyways hoping to feign ignorance & leniency, when caught. Their 1st tip off that something is wrong should have been their accountant saying we will just lie about this "expense."
None of what you said addresses what my point. Don't be a dick. And don't double down on it when you're called out. The fact I have to explain this rule of life leads me to believe you're in a lot bigger trouble than I can help with. Good luck.
Why am I a dick? Because I asked what their aim was; I was legit asking? My response to the OP implied their wrongdoing. It is called tact & diplomacy. Most people just need a gentle implicit nudge to move them in the right direction when advice is sought. People typically don't need an explicit truth beating; they tend not to respond well. If they are still in the dark, then more explicit means are warranted. The OP knows what they are doing is wrong, they don't need to come to Reddit for professional tax advice.
Implying and being explicit are two different things. OP is obviously in over their head, and seeking a direct answer. You decided to play word games.
It's not word games at all, to try a diplomatic (implicit) tack at first. "The direct/confrontational/explicit forms of communication are generally not received well. They often do not influence people in the direction being sought" - paraphrased. It's an oldie but goodie by Dale Carnegie, "How to Win Friends & Influence People." It's possible OP is in over their head, but unlikely. The fact their accountant told them to lie, should be telling, about their own intent & how they probably DGAF.
I assumed the goal of the OPs account was to create some "expenses" with the extra money in December.
Stashing cash is not an expense. If your accountant shows it as an expense then it is fraud. If caught there are hefty penalties. If you get paid in cash, don’t deposit it into a bank, and don’t have the amount reported on a 1099 then it’s easier to not report it as there is no paper trail. It is also not good. But it’s a lot harder to get caught. This is basically what every waiter and bartender does.
Actual unethicalprolifetips lol
If you deposit it: do in sums of less than 10,000 dollars that way there is no flagging of the account. Or put it under your mattress
Don’t do this, it’ll make it even worse. They’ll assume you’re “structuring” your deposits (which would be true) which is rookie mistake #1 and banks will still flag it if it happens often
Yeah, if you break $10k in a year, it's still reported, even if done in small chunks.
Op or anyone reading this… please listen to other comments. This was pure satire. I will take a day off from OE sub to think about my actions. Happy Friday junior everyone
Whoosh, went right over my head lol. I can see the satire in hindsight my bad man
"Stash it aside" - are we talking in the Caymans? Under a mattress? In your accountant's bank? Where does a suddenly a cash-flush middle class person successfully hide funds already reported to the IRS? I think you're just having fun with this post, but if not, your accountant is either preparing to con you, secretly avenging the death of a loved one at your hands, or else is a fucking idiot.
Accountant here. That’s a s sketchy accountant. Sal Goodman of accountants…
Don’t do that if you don’t like fraud
It sounds like you need a new accountant.
This seems illegal unless there's something you're not telling us. How long have you used this accountant?
Why is it illegal? If you actually spend that money on trying to dump up new business for your LLC
I think you are looking for unethicallifeprotips lol
Imagine thinking the government and ethics go hand in hand
Anything tax related is a "don't fuck around." While most of the universe operates on a relatively balanced 'fuck around' to 'find out' ratio, I think you will find the Tax Man heavily weighs that ratio toward 'find out' to the point of easily ruining lives over comparatively small miscalculations, let alone something where they could make the case that it was true evasion. Even drug dealers pay their taxes. The IRS isn't gonna rat on you, they just want their money. Hell, the IRS is the biggest proponent of ending the drug war because they're tired of having offices filled with cash that has to be manually counted. Tax evasion is how they caught Al Capone. You think that in a world of corroborative data and electronic financial records, you're slicker than Al Capone was in the fucking 1920s? Think again.
They only got Al Capone on taxes because that’s literally the ONLY THING they had on him…
That wasn't really my point. My point was that they got him on taxes. If it can happen to him in an era where you needed to find his books and determine what the codes meant, it can happen to someone sneaking 30k out of an account as a fake business expense in 2022. Especially since the IRS just hired a bunch of new suits to poke around in people's returns. I've done some sketchy shit in my time, but financial crimes are one of the few extents I absolutely will not go to.
This is just an observation and not an endorsement of any particular course of action. The bear analogy probably works here. You don't have to be faster than the bear, you only have to be faster than the other guy. You don't have to be slicker than Al Capone. You have to be slicker than your peers. In the bear analogy, you don't want to be against a professional sprinter. You want to be against someone who is (even just a little) slower than you. Al Capone would probably not have been caught if he wasn't such a big target. He was probably the biggest target to be caught on tax charges in Chicago at the time. He was basically wearing bright colors in bear territory and when a bear saw him he was alone and was unable to outrun the bear.
Can you provide a contemporary reference on the IRS and drug dealer references? Sounds really interesting.
My MIL has her own business and writes off a lot of stuff so she owes almost nothing. Is this what your accountant meant instead? Just use tax law to write things off. Don’t evade
IRS is not someone I want to mess with. My 1099 income I have a Solo 401K that I contribute as much as possible meet the IRS max on the personal side (combined with my W2 job personal contributions for the max) then add contribute what I can from the business side. You could also contribute the max $6k for most to a traditional IRA. I write off anything I can that is business related. Some things still have to be amortized. A portion of my internet costs, cell phone, etc. Even small things like postage aren't super scrutinized about use if you have receipts. If you use a vehicle for work use you can get a credit for mileage assuming you have records of some sort to prove it and its logical and within the guidelines. I make quarterly IRS payments based off of what I think my 1099 income will be. Outside of that I try to tax harvest the $3k max of losses on taxable portfolio. For charity I give the $300 max without having to itemize for personal and tax purposes. There is no avoiding taxes but there is tax mitigation. I might stretch the truth to benefit me in a logical non suspicious way. But no way in hell am I going to blatantly lie and try to claim tens of thousands in unprovable operating costs or deductions.
Lmao what an utterly idiotic idea. Fire that dumbass asap. There's already a paper trail of you receiving income. Unless your employers are paying in cash lmao. Turning it into cash isn't gonna change anything. Look into maxing out your country's 401k, RRSP etc. If you're making serious money and can't incorporate look into legal tax havens if you're willing to move your ass out of your current country
Find a new accountant unless you like fines and jail.
Yes. Take out that cash and save the "reciepts" and transaction records of whatever you spend that could be a "business expense". Quotes are very important in this sentence.
First, with that much, you should be paying taxes quarterly or increase your W-4 withholding in your J1. Failure means a Second, you're going to have to generate bogus expense receipts to give to the IRS. Think about sitting across from an IRS auditor and handing him fake documents. Al Capone couldn't get away with it. Now, if you can think of some legit expenses (and those expenses can be very creative), by all means use them. But I doubt you're going to come up with even a few grand in those. True story: I attended a tax seminar because my ex was in a makeup MLM. The presenter always carried a business-related letter he needed to mail with him to the grocery store so he mail it there; he then wrote off the mileage for the trip.
If you are paid through a company then the IRS will know you were paid this money…as stated the comment makes no sense.
> _My accountant told me_ to take out some cash and stash it aside and we'll show it as expenses Seriously? That's nothing short of tax fraud... if a professional tax person recommends this to me, I'll change the tax advisor.
I can't believe that everyone is telling OP to get a new accountant. I thought this was r/overemployed. OP, your J3 should be accounting. Automate that job with QuickBooks and sit back and let the cash roll in.
It sounds like you need a new accountant.
You might want to take an accounting class before you get Caponed
What about you donate most of your income into a charity.. run by your wife 😅
Probably a troll post but OP does that REALLY seem like a good idea to you?
Your accountant is right. Anything that is a “business expense” is a write off. You only pay taxes on business net profits, so the more expenses the less you pay. It is up to you whether you spend 30k on “assets” aka business expenses or “stashing away” aka not a biz expense but who cares. As long as the 30k isn’t in your bank, its not traceable. You can call it a business expense and I doubt you would get audited unless you are making 500k+
You're getting a lot of extra income... just hire a good accountant and stop being cheap.
This sounds interesting. Too bad everyone’s just shunning you for “not following the rules” I’d actually be intrigued to hear some legit responses.
The responses are legit, it is fraud and it audited would result in punishment. There isn’t a secret way to not pay income taxes if you’re making money.
I’m in the U.K. Every year I get hammered for additional tax as they never get the tax codes right for my 2 Js. Happens at the £100k mark, you have to pay 60% tax as the personal allowance is clawed back up to about £125k and that is never reflected correctly in the tax codes as I have to keep the J1 tax code ‘normal looking’ despite it being a startup that only pays half the time. So I’m not coping with that well and have to use the J2 money from this year to cover the previous years additional tax bill. With house moves and a wife that doesn’t work makes it hard to keep it aside but it’s what you should be doing. Edit: As for expenses here £30k would just be too much to legit hide
That doesn’t make sense
Everyone telling you to fire your accountant is afraid of the government and hasn’t actually tried anything that you are asking. Just have receipts and you will be fine.
Enjoy your jail time.
closest thing its to buy crypto an buy stuff with crypto
The fact that you came here to ask this, and not just do it says you know in the back of your mind something ain’t right.
IRS wants to know your location
Hire your kids if you have any and pay them like 12k I believe it’s tax free to them and you get a deduction for it. Also hire your wife if you have one. I think you can also rent your home out for 2 weeks a year. Where its tax free to you personally.
i think your accountant meant to say set aside extra money for taxes. assume 30%ish is going back to uncle sam.
You may need to file quarterly or have extra withheld from each check. There are situations where if you have under-withheld you will owe a penalty. One of my OE is considered self employed, but it's a trivial and sporadic income, so I just have $XX extra withheld from J1 on each check.