Tuesday, June 29, 2010

Just desserts? Or tragedy?

I heard a news report this morning about folks in the Louisiana, fishermen primarily, who are worried about getting compensation for their losses. They can't fish because of the spill, and want to make a claim against BP for their lost income.

Their problem is that they've been operating in a "cash economy." That is, they get paid for their catch in cash, and they don't declare the income. They don't get 1099s, they don't self-report, they don't pay taxes. And now they can't prove what income they had in order to support a claim for lost income.

Do we feel bad for these folks? Well, I do, but not very much. I have a former brother in law who worked as a waiter and bartender for years, and he pretty much hid most of this tip income from the IRS. This worked for years, until he wanted to buy a house and couldn't establish sufficient income to get the home loan. Decisions have consequences.

Not paying taxes is criminal activity, and it's tough to have much sympathy for folks who don't pay taxes but now want government to jump in and fix their problem. I feel bad for the innocent family members whose breadwinners are now out of work and out of luck, but it doesn't bother me to see these tax cheats suffer the consequences of their illegal behavior.

4 comments:

Matt said...

Now a tax return would just be a way of proving their income. If they had kept good records and were able to prove their income without filing taxes, they should definitely be compensated by BP (not government)...of course, that would probably put them in trouble with the IRS.

alan said...

Agreed. From the news article it sounded like pure cash, no records. And if they can prove up income, by all means they should be compensated. They're victims, too.

Anonymous said...

Not unlike the injured worker seeking some disability benefits and who has no reported income for the previous twenty years . . .

ericn1300 said...

I heard that story too and when I heard that the attorney was going ahead with the claim it might just put the gentleman in question on the hook for back taxes. If he claims a past revenue stream as basis for a claim he opens himself up to back taxes and penalties on what he claims.

In a cost intensive cash business such as fishing he should have been filing tax returns showing no real profits and paying no taxes. Who knows, he might have even been eligible for the Earned Income Credit.