What is unreported income?
Unreported income refers to any income that is not reported to the government for tax purposes. This can include income from various sources such as self-employment, rental properties, investments, and tips.
It is important to report all income to the government because failure to do so can result in penalties, fines, and even criminal charges.
How can unreported income be detected?
Unreported income can be detected through various means such as audits, information matching programs, and tips from the public. The government has access to a wide range of information sources such as bank records, credit card statements, and property records that can be used to identify unreported income.
Additionally, the government may use statistical models to identify taxpayers who are likely to have unreported income based on factors such as occupation, income level, and geographic location.
What are the consequences of not reporting income?
The consequences of not reporting income can be severe. Taxpayers who fail to report income may be subject to penalties, fines, and interest charges. In some cases, the government may also pursue criminal charges for tax evasion.
Additionally, failure to report income can result in a loss of eligibility for certain tax credits and deductions, which can result in higher tax bills.
How can I avoid unreported income?
To avoid unreported income, it is important to keep accurate records of all income and expenses. This includes keeping receipts, invoices, and bank statements. If you are self-employed, it is important to keep track of all business-related expenses and to report all income on your tax return.
If you are unsure about how to report certain types of income, it is recommended that you seek the advice of a tax professional.
Nick Simpson
Founder @ WorkMade
I started working for myself at 9. My first tax bill showed up at 14. I didn’t understand it, and nobody around me could really explain it. If you’ve been there, you get it. Twenty years later, after creative directing for brands in New York and buying and selling a few companies, I kept seeing the same thing: smart, talented people losing money to a system that wasn’t built for how they work. That’s why I built WorkMade. Not to make taxes “easier to understand” but to make them disappear into the background, so you can get on with your life.