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More than a quarter in US don't pay taxes on their side hustle

A recent survey found that about 69.8 million Americans are working a side hustle for cash under the table with taxes left unpaid. That's more than a quarter of the adult U.S. population doing things like driving for a ride-sharing company, selling art online, or working another job on top of -- or outside of -- traditional employment. The amount in earnings left undeclared to the IRS each year? About $214.6 billion.

That's a lot of potential IRS audits. Who are these tax-avoiding side-giggers?

According to the survey, which involved 2,245 respondents and was performed by finder.com, they're not limited to the young or those who don't earn enough to pay taxes.

There are minor generational differences. A third of Millennials with a side job don't declare the income. 26 percent of Generation Xers with side jobs don't declare, compared to 16.6 percent of Baby Boomers.

Interestingly, 36.3 percent of people making $150,000 to $300,000 who have side jobs don't declare that side income. Failure to declare side income was actually most pervasive in that income bracket.

Again among those with side jobs, men (30.7 percent) were more likely than women (27.4 percent) to refrain from mentioning the side income to the IRS. The three states where failure to declare side income was most common were Alabama, Washington and Illinois.

The average participant in the gig economy made about $3,075 in off-books income last year, or $256.26 a month.

What does all this tell us? Essentially, the story the numbers depict is that failure to declare side income is very pervasive across a wide range of demographic groups. There's no obvious pattern, which may indicate that the real issue is ignorance of the law.

Why should you report your income when other people aren't?

It may seem unfair, but you should report all of your income. You're not doing yourself any real favor by working off the books. The service you work through probably isn't off the books, which means it's probably reporting on its relationship with you. The IRS only has to connect the dots.

If you don't keep good records, you could be in trouble if you are audited. And, if the IRS finds that you've willfully or intentionally avoided paying taxes, you could be charged with tax evasion, which is a criminal felony.

Moreover, keep in mind that every dollar you report gets added to your Social Security record and increase your income later.

If you're working as an independent contractor, you need to pay a self-employment tax on most income and you need to file quarterly. That means four times a year when the IRS could notice your missing tax return and initiate an audit.

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William T. Peckham
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