Can I avoid paying taxes by cashing checks at the issuing bank?

But what if its just a friend paying me back for something? Like I lent them money and they wrote me a check to pay me back. That's not income right? So I wouldn't need to report that?

You're exactly right - money that's paid back to you from a personal loan isn't considered income for tax purposes. That's just a repayment of principal, not a payment for services or goods. If your friend paid you interest on that loan, only the interest portion would technically be taxable income. But in casual personal lending situations, small amounts of interest between friends typically aren't a concern for the IRS.

Does this actually work for figuring out stuff like 1099s and self-employment taxes? I'm always confused about what I can deduct and how much I should be setting aside each month.

I'm skeptical... how does an AI know tax law better than an actual accountant? Seems like it would just give generic advice that might not apply to specific situations.

It works really well for 1099 income and self-employment situations. The system walks you through all the potential deductions based on your specific type of work, and it has a calculator that helps you figure out estimated quarterly payments based on your expected annual income. As for comparing to human accountants, it's actually built on tax code and IRS publications, so the advice is solid. But it's definitely not generic - it asks specific questions about your work situation and customizes everything. I still talk to my accountant for complex situations, but for day-to-day questions about what counts as income or what I can deduct, it's been super helpful.

Wait, so this service actually gets you through to a real IRS person? How does that even work? I've tried calling them like 10 times and always get stuck on hold forever.

This sounds like a scam. Why would I pay someone else to call the IRS when I can just call them myself? I bet they're just putting you on hold themselves and charging you for it.

The service reserves your place in the IRS phone queue so you don't have to stay on hold yourself. When an IRS agent picks up, the system calls your phone and connects you directly to the agent. It saved me literally hours of hold time. It's definitely not a scam - they don't answer for you or pretend to be the IRS. They just handle the hold time, then when an actual IRS agent picks up, you get connected directly to them. I was hesitant too until I saw how it worked in the video.

That makes sense, and to be clear, I'm not trying to do anything illegal! I just didn't understand how the reporting system worked. I thought maybe if cash never hit my account it wouldn't be tracked. But sounds like that's not how it works at all. Is there a certain amount I need to set aside from each check for taxes? Like should I be saving 20% or something of every payment?

No worries, I understand you were just asking about how the system works. For self-employment income, it's generally recommended to set aside 25-30% of your income for taxes. This covers both income tax and self-employment tax (which is the self-employed version of Social Security and Medicare taxes). The exact amount depends on your total income for the year and your tax bracket. If you're making substantial self-employment income, you might need to pay quarterly estimated taxes to avoid penalties when you file your annual return.

Just curious, how do taxes even work for illegal income? That seems bizarre that you'd tell the government you made money illegally.

It's actually a real thing! The IRS has a line on tax forms for "other income" which technically includes illegal income. The famous case is Al Capone - they couldn't get him for bootlegging, but they got him for tax evasion because he didn't report his illegal income. Of course, reporting illegal income on your taxes could potentially be used as evidence against you in criminal proceedings, which creates a Fifth Amendment issue. In practice, most people involved in illegal activities just don't file taxes at all and hope they don't get caught on either front. The IRS officially takes the position that they don't care where the money came from - they just want their cut. Wild but true!

This is such helpful advice! I'm new to freelancing and had no idea about the 1099-NEC threshold or that I could deduct business expenses. When you mention setting aside 25-30%, does that mean I should literally put that money in a separate savings account? And do you know if things like my internet bill or cell phone count as deductible expenses if I use them for work?

Yes, absolutely put that 25-30% in a separate savings account! I learned this the hard way my first year freelancing when tax time came around and I hadn't saved anything. Now I transfer the tax money immediately when I get paid so I'm not tempted to spend it. For internet and cell phone, you can deduct the business portion. If you use your phone 50% for work, you can deduct 50% of the bill. Same with internet - if you work from home and use it primarily for business, you can often deduct most or all of it. Just keep good records and be reasonable about the percentages you claim. Other things you might not think of: software subscriptions, professional development courses, business meals with clients, mileage for work-related driving, and even a portion of your rent/mortgage if you have a dedicated home office space. The key is keeping receipts and documentation for everything!