“Good morning, IRS, how can I help you today?” (Said no IRS agent, ever).
No. Rather, when you call the IRS, it’s “This is Agent _____ #1234558 may I have your name please.” The IRS isn’t exactly known for their hospitality on the phone or in their headquarters. However, they excel at getting to the bottom of things and investigating some of the smallest to largest of crimes that even sank the once hard-to-nab Al Capone. Did you know he was actually imprisoned for tax evasion?
The tax man wants to get paid. Don’t shoot the messenger; if you want to change the laws, propose a bill. Think massage therapists are not on the IRS watch list? Think again. Articles like this do not help our situation and do nothing more than create more attention and selected returns for review among massage therapists every year. Massage therapists are not immune to the prying eyes of the IRS. There have been some serious penalties handed down for evasion and fraud.
Therapists in the News for Tax Evasion & Fraud
http://indianapublicmedia.org/news/columbus-massage-parlors-shut-tax-evasion-27460/
http://www.justice.gov/usao/de/press/2010/Connor%20Sentencing%20Press%20Release.pdf
Ways to Openly Invite the IRS to Your Door
Not Reporting Cash or Tip Income
Newsflash. The IRS knows we make tips and get paid in cash sometimes. It’s important, throughout the year, to make cash deposits and record those deposits from where they originated from. Consistently running cash through your bank account is the way to ensure the IRS doesn’t need to sniff around too much at your door if they choose to audit you.
Want them to stick around longer? Pocket the cash, don’t report it, and evade the taxes. You might as well have put out the welcome mat for them.
Earmarked Gifts for Hurricane Sandy
An earmarked gift is a transfer that has not been made to a charity in a deductible form because the recipient charity’s function is as an agent for a particular noncharitable recipient.
Here is an example of the improper use of a charity as a fiscal agent in an effort to obtain a charitable deduction:
“I want to help my friends Fred and Mary who are going through a tough financial time because of a recent hurricane. If I give the ministry $500, will you pass it through to them and give me a charitable receipt?”
This is also called “conduit” or “pass-through” transactions. These connotations are negative references when used by the Internal Revenue Service (IRS) and generally denote amounts that do not qualify for a charitable deduction. To be deductible, the charity must have discretion and control over the contribution without any obligation to benefit a designated individual.
There’s some of this happening right now. Donations are being sent to churches that technically are charity organizations and thus exempt, but again, because the funds have been earmarked for a specified group of individuals, they do not qualify as a deduction. If you just want to truly “gift” an item or money, then just make sure it gets directly to the individual in need. If you recently sent money to a church to get to massage therapists affected by Hurricane Sandy, sorry, your donation is not tax deductible and any receipt you receive is evidence of a pass-through or conduit transaction.
If you need your donation to be deductible, select a qualified and reputable massage therapy organization to contact and ask how you can help donate to the cause.
The “Don’t Mess with Minnesota” Argument
This more or less has to do with citizenship, but certainly an interesting one people have used to evade taxes. http://www.cracked.com/article_17240_7-retarded-tax-evasion-schemes-people-are-actually-trying.html
Not Paying Sales Tax
Bank levies, tax liens, and imprisonment. By your own beloved state. Sales taxes are considered a trust tax and must be remitted to your applicable state’s department of revenue. Think the IRS won’t find out about your tax levy? Think again. The IRS will use this information as basis for inspecting other returns and subjecting them to even further scrutiny since you cannot be trusted to pay what you own your own state.
How to stay out of the news: when conducting business, pay your taxes. Do not try to pass-through or use a conduit in donating. Be proud of the state you live in and do not renounce your citizenship just to avoid taxes. Pay your fair share, file the right forms, legitimize all your business activity and then you will not have to be looking over your shoulder for the tax man (or woman). Don’t be one of the therapists in the articles.
Questions about tax law? Post them down below.
Good points. Allissa Haines has commented that paying taxes is simply the ethical thing to do, and that by doing so, therapists elevate their professionalism and ultimately their practice.
Hi Ben –
Thanks for reading. Paying taxes is not simply the ethical thing to do. It’s the law. Being ethical is not the same as following the law. The law often incorporates ethical standards to which most citizens subscribe, and I think it’s evident even within our industry circle there is a wide range of what is considered ethically acceptable and what is not. However, application of the law is fairly black/white with a medium list of interpretation as supported by precedence, as I’ve found in my studies as a third-year law student.
Elevate professionalism? Perhaps “maintain” would be a more appropriate application here. Paying more taxes than someone else or filing more returns does not equate to a higher degree of professionalism. Nor is the fact that Jane Doe business person paid their taxes on time advertised to the clientele. Rather, it is when NOT paying taxes is advertised in a public media article that clients become aware of the legal violation, and the therapist loses the professionalism they once maintained, and thus, their standards of ethics would be called into question, as well. Is John Client going to think any higher of a therapist because they pay their taxes? Probably not. Paying taxes is expected. There are other ways to elevate professionalism.
Laura Allen has a lot of experience in the subject of ethics and application, as well as years of teaching classes on ethics and serving on numerous boards. Her website is at . I strongly recommend some of her articles on the topic outside of the tax arena.