As enforcement efforts have redoubled at the IRS, one after another of the notorious tax dodges is beginning, at least, to bite the dust. Those guys who claim that only foreigners have to pay the income tax because there is no law that imposes a tax have been shown the door--to the jailhouse, in some instances (along with sections 1 and 11 of the Code, whereby a tax is "hereby imposed" on taxpayers of various status). Those folks who thought they would hide their riches from the government and take a free ride on the majority of folks who are honest and compliant taxpayers have been desperately seeking certainty about whether their names are or are not included on some list or other, whether their banker will be ferreted out by one or another of the voluntary disclosures or purchased data lists, leading ultimately to them--their days of success, one hopes, are over, whether they are with UBS or HSBC or some other big bank that has enjoyed juicy bonuses by helping them evade US taxes. And, how about those folks with businesses that pass off their employees as "contractors". Blackwater--the corps of mercenaries that got paid much more for each of its employees (oops, contractors) than each soldier in the real army gets paid, and then got to scoff at the laws and commit murder with impugnity --it treats its hired mercenaries as independent contractors to rake in even more profits from its contracts with the US.
Well, the Federal and State governments are cracking down, as noted by Steven Greenhouse in today's NY Times, U.S. Cracks Down on 'Contractors' as a Tax Dodge, NY Times, Feb. 18, 2010. Greenhouse reports that more companies are claiming employees are contractors though its the employer who provides desks, phones, assignments, and pay. Workers are more reluctant to challenge because of the tough job market. (More evidence of the ways in which workers' rights are being inappropriately restricted by the economic muscle of corporations, since the companies can forget about minimum wage, overtime and antidiscrimination laws. avoid providing benefits like health insurance, and avoid paying the FUTA and FICA payroll taxes for these "contractors"--saving themselves money, but costing the workers dearly in the short and long run. As one worker said, "It's a win-win situation for them and a lose-lose for us. We didn't get overtime, sick days, vacation days, health insurance or pensions." Id.
Without withholding for taxes, these employees are often caught short at filing time--and the articles suggests that about 30% of income doesn't get reported. The numbers of workers in this category is not small--3.4 million is one estimate; 30% of companies misclassify is another.
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