As a proud member of Generation X, otherwise known as the “latchkey generation,” I grew up in the 1980s and 1990s watching my elders enjoy rewarding careers in Corporate America. I’d observe them work dutifully for one company most of their adult lives and retire comfortably with a nice, cushy pension.
Fast-forward to 2018 and today’s workforce barely resembles the one I remember. Nowadays, people change jobs a lot. The era of working for the same company straight out of high school or college until retirement is long over. Today’s workers are migrating from job to job in search of fulfillment, higher pay, and more opportunity.
According to CNNMoney, the new normal is four job changes by the time a worker reaches the age of 32. “The new normal is for Millennials to jump jobs four times in their first decade out of college. That’s nearly double the bouncing around the generation before them did,” Heather Long wrote for CNNMoney.
Over the years, employment has changed and not just because of automation and artificial intelligence. The retirement landscape has shifted dramatically. Today, few private companies offer retirement packages like they did in the 1950s through the 1980s. Older workers (Baby Boomers) are feeling workplace ageism as they’re being replaced by younger, cheaper workers. Meanwhile, Millennials are feeling more disposable — and restless — than their parents did because job security has become a thing of the past.
Another issue is that almost all states are “employment-at-will” states. This means that an employer can fire an employee for any reason, with or without good cause, providing the employee isn’t locked into a written employment contract. Of course, there are limits to the employment-at-will doctrine. Employers are strictly prohibited from firing workers for discriminatory reasons, such as race, religion, nation of origin, sexual orientation, or disability. Barring discrimination, employers have a lot of discretion when it comes to firing employees at the drop of a hat.
Joining America’s Gig Economy
So, what’s a worker to do? Wait for their boss to be promoted so they can be moved up the ladder? This can take years. Hope someone on top will be fired so they can replace them? This is hardly ideal, plus it can create unhealthy competition in the workplace. To gain control of their financial destinies, more (and more) corporate employees are becoming freelancers and independent contractors — they’re joining the “gig economy.”
The gig economy refers to the shift from full-time W2 employment to temporary or flexible jobs involving freelancers and independent contractors. I should know, as a freelancer writer and blogger, I’m a “gig worker.” Even large companies are hiring gig workers, in part because they don’t have to contribute to workers’ Social Security taxes, nor do they have to provide health insurance. Gig workers are attractive to some companies simply because they’re cheaper than hiring full-time employees.
So, You Want to Be Your Own Boss?
Have you been dreaming about being your own boss? About setting your own fees, sleeping in until 9:00 am, working in your pajamas, and being able to work from anywhere as long as you have your MacBook and a Wi-Fi connection? While nothing may seem better, there’s a little issue that’s been affecting America’s gig economy and given that it’s tax season, I though now was a good time to bring it to your attention — it’s tax evasion.
For the average W2 employee, tax evasion is only something they’ve heard about in a finance class they took in college, but even then, they weren’t paying much attention. Once you become an independent contractor, suddenly the fear of an IRS audit is a little closer to home. Lots of self-employed individuals fear IRS audits. In fact, the fear of an audit keeps a lot of us honest. The fear drives us to file accurate and timely tax returns.
Who Does the IRS Target for Tax Evasion?
The server or stylist who fails to report all of their tips? The business owner who deducts their personal meals and airline tickets? The auto mechanic who takes cash payments for his services and fails to report them to the IRS? The handyman who works for cash? As a general rule, the IRS targets taxpayers who:
· Underreport their income
· Overstate their deductions or credits
· Do not file their tax returns at all
“But what if I simply don’t have the cash on hand to pay my taxes? Will the IRS prosecute me for tax evasion?” The IRS is not in the practice of prosecuting people for tax evasion because they don’t have the money to pay their taxes. However, if you work for cash and hide your income, or if you do not file your tax returns, or if you hide assets so you avoid paying the IRS what you owe, you can get on the IRS’s radar and receive unwanted attention. You could even be prosecuted for tax evasion.
Usually, a tax evasion case starts after the IRS audits someone and catches glaring errors. Such errors often include knowingly and willingly misreporting income and deductions over a period of years. If an IRS auditor catches fishy behavior, such as hiding income from a side hustle, or purposely hiding records from a bank account, or making a false statement, it can trigger a criminal investigation for tax evasion.
Such issues have gotten a lot of gig economy workers into legal trouble in recent years, especially when they work full-time for a regular company, but fail to report income from a side hustle. Tax evasion is no joke. It’s criminalized under Title 26 USC § 7201 and is punishable by up to 5 years in federal prison and by a fine not to exceed $250,000 for individuals or $500,000 for corporations.
If you’re dreaming of joining the gig economy, I say do it. It’s a wonderful opportunity, which provides freedom and flexibility. But whatever you do, make sure you understand your rights and responsibilities under state and federal tax laws, because they will be different than what you’re accustomed to as a W2 employee.
Elainna Ciaramella is an independent journalist, business blogger, and ghostwriter for entrepreneurs and business professionals nationwide. She has written extensively on the topics of business, entrepreneurship, law, and medicine. She is well-versed in search engine optimization, content marketing, and social media. You can follow her at www.elainnaciaramella.com , on LinkedIn, Twitter, Facebook, Google +, and Instagram.
Originally published on elainnaciaramella.com.