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Is the IRS Monitoring My Check Cashing Location?

News, Offshore Account Update

Posted in on May 31, 2023

As a U.S. citizen or resident living in Virginia, you have an obligation to report your income to the Internal Revenue Service (IRS). This is true regardless of what you do with your income—whether you receive direct deposits, deposit your paychecks with your bank, or cash your paychecks as soon as you receive them.

If you cash your paychecks, you generally don’t have to worry about the IRS monitoring your check cashing location. But this doesn’t mean that you can avoid paying what you owe. The IRS will likely learn about your income through other means, and facing a federal tax audit when you haven’t reported your income can lead to serious consequences.

How the IRS Can Learn About Your Income

When you get paid, you aren’t the only one required to report your income to the IRS. If you are an employee, your employer must report your wages or salary to the IRS as well. Not only do employers have an obligation to report their payroll for federal employment tax purposes, but in order to deduct their payroll expenses on their income tax returns, they must document these expenses—and they must be prepared to provide this documentation to the IRS when necessary.

Similarly, if you are an independent contractor, the company that pays you must report your income if you receive more than $600 during the tax year (which is the calendar year for most individuals). It will report your income using Form 1099, and if the IRS receives a 1099 that does not have a corresponding income tax return, this can lead to scrutiny.

Consequences of Cashing Your Checks Without Reporting Your Income

You can face a variety of consequences if you cash your checks without reporting your income to the IRS. As soon as you fail to report your income, you immediately begin to accrue penalties and interest. If the IRS conducts an audit, not only can it take action to collect the taxes, penalties and interest you owe, but it can also refer your case for criminal prosecution.

If the IRS accuses you of intentionally evading your federal tax obligations, you can face criminal charges under 26 U.S.C. Section 7201. This section of the Internal Revenue Code imposes criminal penalties for tax evasion. If convicted, you can face up to a $100,000 fine and five years of federal imprisonment.

What if you have already cashed checks without reporting your income to the IRS? If you are at risk of facing criminal tax evasion charges, you need to handle your situation very carefully. You may be able to avoid prosecution by making a voluntary disclosure, but you will need to work with an experienced tax lawyer to ensure that you receive the protections that are available.

Request a Confidential Consultation with Tax Attorney Kevin E. Thorn in Virginia

Do you need to know more about the risks of failing to report your income to the IRS? If so, you can contact us to arrange a confidential consultation. To request an appointment with tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call 703-752-3752, email ket@thornlawgroup.com or contact us confidentially online today.

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