If there is one thing that you always need to remember, it’s that the Internal Revenue Service will try to get every penny that it is due. While there are times when it will give people payment plans or help with installments, the reality is that failing to pay taxes or evading taxes in any way can come back to haunt you.
As someone who does a few side hustles and brings in cash from them, you may be wondering if it’s worth reporting that income. On one hand, you know that you’re bringing in real earnings, but on the other, it’s all cash in hand. The IRS couldn’t know about those cash transactions, so should you report them?
The IRS can know more than you think
Cash income is reportable to the IRS, and you shouldn’t try to hide it. The IRS may perform an audit to go through your accounts and realize that something doesn’t quite add up if you’re getting large cash deposits but aren’t reporting any income on your tax returns.
The IRS expects you to report all income from any source. You’re meant to report something as small as taking payment for walking someone’s dog to accepting cash at a festival for your services.
If you fail to report that cash and the IRS happens to audit you, you could end up facing trouble. In fact, if the IRS figures out that you were intentionally withholding information and avoiding taxes as a result, you could be hit with fines and fees as well as criminal penalties.
You need to have a strong defense if you’re going to be audited
If you’ll be audited, it’s important for you to build a defense as soon as you can. You may be accused of tax fraud or tax evasion, both of which are serious federal crimes.
Once you know that an audit may occur, it’s time to learn about your legal rights and to discuss your options. There may be ways to negotiate with the IRS and reduce the amount of money you’ll owe or the penalties you’ll face.