Underreporting of farm income to avoid taxes
One of the largest benefits of owning a small business is that a small business can easily hide income and thereby avoid taxes. How large is this problem? That's very hard to tell. Here's John Berry from Bloomberg: According to Internal Revenue Service research, the tax gap isn’t the result of high-rollers hiding income in offshore accounts. Most of it is the underreporting of income by proprietors of small businesses and farmers and the failure to pay employment taxes related to that income. Also not reported: an estimated half of all income from rents and royalties. ... In 2006, the IRS reported the results of a three-year study of individual income tax returns for 2001. It found a gross tax gap of $345 billion, or 16 percent of taxes due. Enforcement activity plus other late payments recovered $55 billion of that, leaving a gap of $290 billion. That figure, as large as it is, doesn’t include income of the deeply underground economy, including most criminal ente