Is the IRS Keeping Tabs When I Cash My Paycheck?Offshore Account Update
Posted on May 31, 2023 | Share
When you get paid, you can’t afford to wait a few days for the bank to process your deposit. You need your funds immediately, so instead of depositing your paycheck, you cash it. This has you thinking: Do you need to keep track of your deposits to pay your taxes? Is the IRS keeping track of you? Or, can you get away with not reporting your cashed paychecks on your annual tax returns?
As a Boston resident, you have an obligation to report your income to the IRS. This is true regardless of how you get paid—and regardless of what you do with your paychecks. In other words, even if you cash your paychecks, you still need to report your income to the IRS each year.
Understanding the Risks of Cashing Your Paychecks Without Reporting Your Income to the IRS
Is the IRS keeping tabs? Not necessarily. The IRS doesn’t monitor taxpayers’ finances as a matter of course. However, the IRS will still know that you have been paid, and it might choose to conduct a tax audit if your tax returns (or lack thereof) don’t match the other records it has on file.
When you get paid, your employer withholds (or should withhold) income and FICA taxes from your paycheck. It also has an obligation to pay the “employer’s share” of these taxes, which is based on the amount you earn. Additionally, in order to deduct its payroll expenses, your employer must fully document the wages and salaries it pays to its employees—and it must be prepared to provide this documentation to the IRS when necessary.
So, regardless of whether you report your income to the IRS, the IRS will most likely know how much you get paid from your employer.
If you don’t pay your federal income taxes, you can be held liable for back taxes, penalties and interest. In fact, even if you don’t owe anything, you can still face penalties and interest for “failure to file.” Additionally, if the IRS determines that you have intentionally failed to report your income, you can face criminal tax fraud charges that carry up to a $100,000 fine and five years behind bars.
What Should You Do if You Haven’t Reported Your Income to the IRS?
Given these potential consequences, what should you do if you have cashed your paychecks without reporting your income to the IRS? While reporting your income now might seem like the best option, this could be dangerous. The better approach may be to take advantage of the IRS’ voluntary disclosure program, but this requires a careful approach as well.
Discuss Your Options with Tax Attorney Kevin E. Thorn
If you need to know more about how to deal with the IRS after cashing your paychecks and failing to report your income, we invite you to get in touch. To request a confidential consultation with tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group in Boston, call 617-692-2989, email firstname.lastname@example.org or contact us online today.