Tax question, a "what if"

ok ok dont flame me i know i shouldnt do this but im curious if any of you could tell me if the IRS would notice

so i had a small job, i made exactly $1,979 in 3 weeks then was laid off, well on my w4 i stated i wanted to claim 1, the company entered in 7.

i didnt notice it till i got my w2's today... (only paid $3.00 in federal) so i called them, the lady pulled my w4 paper and says she thinks my 1 looked like a 7 and thats why she entered in 7 DA FUQ!!! who the eff claims 7!

well after talking with her there's nothing she can do or so she says because the payroll is already done and entered and w2's sent

so heres my question, if i were to just "not claim" this w2 and not enter it on my tax returns? what would happen? would the IRS even notice a small 2,000 missing? if they did what would happen?

i did an estimate on HRblock for the difference with and without this income on my return.

difference of just under $500.00!!!!! less on my tax returns!!! JESUS!!!! so there error is going to screw me out of $500 bucks... hence my question

 

my estimated return without this entered was $1,347

with this entered was $874

 

a different way to ask is what is the worst thing that can happen if you leave it out and they do notice it?

I've been audited twice and in both cases pushed some deductions pretty hard, "forgot" a couple items. In both cases we worked with a number, negotiated a tax due amount and I paid interest penalties. If they do catch it, you are likely to get a notice asking you to explain it or provide the info and you have to pay what you owe plus interest and or penalties. I'm pretty sure they do not double check every single tax return.

It's your call and I am not a tax attorney. However, I seriously doubt if they do catch it you're going to jail for tax evasion. On the one in a billion chance you do, don't forget I said I wasn't a tax attorney.

I once left out a bunch of stock trades that, on paper looked like I was hiding a ton of gains and got a tax bill for a ridiculously large sum. In reality, almost all the trades were offset by losses and it was close to a wash. I paid a few bucks and no big deal. I am also not a stock trader. Lol

 

yea thanks for the stories... im guessing they wont notice it... given i made less and 22,000 without adding the extra 2,000 id be leaving off.

either way i more/less just wanted more opinions on peoples thoughts.

so thank you for your info. hopefully more people will take note of this thread

on a side note, im glad im making a change in careers! i hope i make it out to north dakota soon! 22,000 a year sounds horrible... ill have a minimum of 90,000 a year if i ever make it out there... now i just need a company to hire me with no experience!

 

If they entered 7 for your dependants, than that means your withholding each pay check was substantially less than what it would have been otherwise. It's not like you are "losing" money, you just got that amount spread out in each check

The IRS takes income tax fraud pretty seriously. So if you did get audited...it could be some annoying fines, or they might just make you pay it. And then there is the moral aspect of it, but I won't touch on that lol

 

i realize the morality of it isnt right. but thats another story as you kinda stated.

and i also understand that it meant more money in my checks at the time, but i hardly doubt it meant $500 more in my checks over the 3 pay periods i was even employed compared to the money i "wont" get in my return.

 

The tax rate is at least 25%. Do the math or f*ck with the IRS and take your chances. Just sayin.

 

I agree. That's why I advised the risk/reward analysis. Misplacing a W2 that has 3 weeks of wages isn't fraud, or it isn't likely to be seen as fraud. It's a fuck up.

Just be sure to delete this thread and if you get audited, schedule it on a Friday afternoon on a 3 day weekend. You're fucking golden.

 

TOP IRS AUDIT FLAGS

Mistakes
A common and entirely preventable audit trigger is making mistakes on your tax form. Mistakes can include writing your social security number incorrectly or writing the wrong social security number for any dependents you may claim. Mathematical mistakes, such as making an error when you subtract your expenses from your business income, can also trigger an audit.

High Income
If you report a high amount of income, the IRS may be likely to audit you. 8.5 percent of people who earned more than $1 million in a year were audited, according to Patricia Sabatini of the Pittsburgh Post-Gazette.

Related Reading: Odds of Getting an IRS Audit Based on Net Worth

Excessive Expenses
Another common audit trigger is claiming a lot of expenses, particularly travel and meal expenses. The line between personal and business expenses is thin when it comes to meals and other entertainment expenses. Keep all receipts for such expenses.

Home Office
The home office deduction is another expense that can blur the line between business and personal and lead to an audit. Home office deduction rules are very strict, so speak with a tax professional before claiming the deduction. Be prepared to prove that you truly use your office for business and business only.

Losses on Your Schedule C
If you report losses on your Schedule C, Profit or Loss from Business, year after year, your return may raise some flags for the IRS. A business should be engaged in to earn money, according to the IRS. Usually, you must earn a profit from your business for three out of five years. If you do not turn a profit, the IRS considers your business a hobby, which means you can only deduct expenses up to the amount you earn from the hobby.

Missing Income
If you forget to report income for which you received a 1099, such as $650 that you received from a client for a small project, you may draw the attention of the IRS. The IRS compares the amount you report on your return to any 1099s or W-2s it receives.

Real Estate Loss
Renting property can lead to an audit if you report a loss. The IRS considers real estate a passive activity, meaning you are usually limited in the amount of loss you can claim. In some cases, though, your rental activities may be active, if you can prove to the IRS that you are a real estate professional. You qualify as a professional if you spent more than 750 hours in a year working in real estate and spent half or more of your working time working on your properties.

High Deductions
Claiming deductions that seem too high for your income level is another way to potentially trigger an audit. For example, if your small business brings in $50,000, but you claim $10,000 in charitable donations as a deduction, the IRS may want to look at those donations more closely.

Certain Industries
Your tax return may trigger an audit if you work in certain industry, according to Ray Martin, a contributer to the CBS News "Early Show." Some businesses, such as a car dealerships or tax services, have a history of improperly reporting their taxes, according to Martin, and are more likely to be closely examined by the IRS.

Underpayment
The IRS may audit you if you don't pay enough taxes and don't offer an explanation as to why you aren't paying the full amount you owe. If you can't pay the taxes you owe by the due date, include Form 9465, Installment Agreement Request with your return, which is a request to pay on an installment plan. You can download the form from the IRS website.

 

Underestimate and late payment penalties[edit]

Taxpayers are required to have withholding of tax or make quarterly estimated tax payments before the end of the tax year. Since accurate estimation requires accurate prediction of the future, taxpayers may underestimate the amount due. The penalty for paying too little estimated tax or having too little tax withheld is computed like interest on the amount that should have been but was not paid.[3]
Where a taxpayer has filed an income or excise tax return that shows a balance due but does not pay that balance by the due date of the return (without extensions), a different charge applies. This charge has two components: an interest charge, computed as described above, and second a penalty of 0.5% per month applied to the unpaid balance of tax and interest.[4] The 0.5% penalty is capped at 25% of the total unpaid tax.
The underestimate penalty and interest on late payment are automatically assessed. No "reasonable cause" exception is available for avoiding these penalties.[5]

 

Accuracy related penalties[edit]

If amounts reported on an income tax return are later adjusted by the IRS and a tax increase results, an additional penalty may apply. This penalty of 20% or 40% of the increase in tax is due in the case of substantial understatement of tax, substantial valuation misstatements, transfer pricing adjustments, or negligence or disregard of rules or regulations. For example, a valuation overstatement can result in a 30% penalty on the amount of tax owed. Special rules apply for each of these types of errors under which the penalty may be waived.[9]


NOTE: both my audits involved large inaccuracies and I never paid this. In both cases I paid interest on tax due and a penalty for late payment or underpayment.

 

i am not expert enough (yet) in taxes to know how much each child counts as a deduction, but the numbers are still the same during the year or at the end. so you can claim 7 dependents when you start working and thats how they calculate your withholding, or you claim 7 dependents when you file, it still has the same effect on your tax. its not like the tax law is written to say that if you claim 7 for withholding they take more money during the year than if you claim 7 when yo file.

2k in a month is not that much in respect to having 7 kids (if you actually did) so it would not surprise me that you had almost nothing withheld.

 

You know what is the right thing to do.

 

You're right.

Everyone grab your weapons...we storm the castle at dawn

 

OP-Realize that you already screwed up posting this on a public forum. You know that you made the money, so to not file your taxes correctly is now fraud, not just an whoopsie. They will likely catch you and you will lose even more of your hard earned money, and maybe your freedom.

Do it right.

 

This is true. knowingly withholding income is a lot different than a W2 from 3 weeks of work getting lost in the mail.

Most of my input has been based on my audit experience. Itemized deductions leave a lot of room for interpretation, in addition to reducing tax liability, which is why they can trigger audits. I've never buried income that would have been required to disclose.

Having introduced the topic on a public forum essentially removes the option from the table, or moves it into a fraud category.

For all we know, the OP is an IRS Auditor troll......in which case, let me repeat...I have never buried taxable income!

 

Generally speaking, correct.

The W4 Withholding form isn't directly correlated with dependents. The form allows taxpayers to claim Exemptions based on various factors that allow the amount of tax withheld to be more in line with what is due at the end of the year. This is driven by many factors, including actual number of dependents, projected amount of itemized deductions, tax credits, etc., etc.

I only have two children and my number of claimed exemptions has been between 4 and 9 over the last 15 years.

Additionally, unlike many taxpayers, I always try my best to under pay my taxes up to the point where I would have to pay an underpayment penalty rather than give them a huge interest free loan with my money. It's legal and just another by product of an unnecessarily complicated tax system.

I'm enough of a skeptic to think that one day our government, especially our current government, might just decide the budget deficit is big enough to justify suspending refunds. I'd rather owe them than the other way around.

2013 is a great example. As a result of the Government shutdown, tax filing has been delayed. As far as I am concerned, they can delay it until the cows come home......I owe them.

 

part 1: well ya haha, that is the intent at least of claiming deductions on the w2, is that your withholdings can match up as close as possible to what you will actually owe at the end of the year.

as for the second part, thats a very good way to look at it. I hadn't quite thought of it that way, but very good point

at the same time though, the withholding instrument is a very handy tool for the convenience requirement of our tax system. How many Americans would have all of the funds available to pay their taxes come tax time if they didnt bank that withholding throughout the year? Im going to say very few.

 

True. In my ideal world, income tax is flat and there is no need to spend any time filing just like SS tax. Tax my flat rate out each paycheck and be done with it.

The real beauty of owing the IRS money at the end of the year is in case Atlas ever wants to Shrug. As a country, we can hate on high income earners all we want, but what if the top 20 or 30% of taxpayers, who collectively pay most of the taxes, all decided to underpay at the same time and on tax day emailed the President and said, "we need to talk".

I know this is a much better fictional movie plot than a real life strategy, but if workers can go on strike, why can't taxpayers??????

At some point, a line WILL be drawn.

 

oh thats so true! That would be an awesome plot twist if the top 20% of tax payers had a little sit down.

i realize its not a very good answer...but workers are voluntary...tax payers are not. hard to strike against something legally binding.

and i like many others have thought about a flat tax rate, and to be quite honest, i just dont think its realistic. there are just too many other factors to have something so simple.

so just so i understand what you are meaning, like everyone gets taxed 25% of their income and thats it, done? it sure would be easy haha. but it would have almost the same effect as a head tax, people would riot in the streets.