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  1. Just found this gem, very good post, Mr. Groovy. Totally agreed. Actually, I am surprised that this is a cause for thinking at all, I alway considered this act as normal. OK, I am not a US dweller so cannot speak about your circumstances from experience. But I live in Serbia where corruption is a synonym to politics. Where we have free education and healthcare with a quality that I would (and often have to) happily switch for a paid option if I have a chance. Where the government mistreats its resources, oh and the color of the economy covers the fifty shades of gray. I can agree with the ethical principle of contribution to the well being of people, but if seemingly the government does not really care why would I? This is definitely a stealing from the thief style situation, so sorry government, I have to follow the “what you give is what you get” way.

    • Mr. Groovy

      Thank you, HCF. You don’t know how much your comment means to me. Our government is very corrupt and inefficient. It probably returns about $0.50 of service for every $1.00 it confiscates in taxes. I now tell my detractors that my compassion ends at 15% of my income. If the government can’t solve the world’s problems with only 15% of my income, the world’s problems don’t get solved. My “give a damn is busted.” And I will not sacrifice my liberty for the fake gratitude of my betters and a filthy bowl of oatmeal. Thanks again, HCF. I always love hearing from my European brothers. If anyone knows the horrors of big government, it’s people like yourself.

      P.S. I’m truly sorry for the late reply. Things have been crazy in Groovyville lately and I’m only now catching up.

      • No need to apologize, with two small gals at home with alternating illnesses (flu season, oh, yeah) my time is limited too. Just to turn back for a moment, I faced that in our health care system if a child is sent to a specialist for checking with the mark “urgent” it means they have to finish that control in 24h. In the end, we ended up at a private doctors office. Not complaining, just saying that if your healthcare is affordable compared to your salaries and the quality of service is good then I would consider that as a win-win situation.

        On the $0.50 to $1.00 estimation… I really doubt that our government could show up that good results. Can absolutely relate to that 15% rule, our numbers are different a little bit (10% income tax, 14% pension deduction from you + 12% from your employer, 5.15% healthcare and 0.75% unemployment insurance which is paid by you and same by your employer). Also, note that no 40X, 5XX and other benefited accounts here… Oh I lied, you can pay $50/month into a private pension plan at an insurance company tax-free.

        I am a realist so I do not expect a government without corruption, but I think the percentages are the key factors. If a government wastes (steals) 30% and use the 70% to accomplish things, then there is a visible improvement and still, a situation which I could accept. But to take 70% and try to accomplish something (and fail) from the 30% left is outrageous.

  2. I love the mix of politics and finances over here. I’m not as willing to put my views out there on my blog so I have to come over here to make some comments and get my fix.

    For the most part, I don’t have a problem with a barber not claiming his tips or your handyman not claiming his $170. My issue is where do you draw the line? What if the person is making $45,000 a year working odd jobs but is getting full government support from Welfare and Food Stamps? I then suddenly have a big problem with them not claiming their income.

    I also don’t like that as a society we vilify the rich for “underpaying their taxes”. The rich are usually just hiring accounts to take advantage of every possible legal tax deduction (commonly referred to as a loophole to make them sound more sinister) to keep as much money in their pocket as possible.

    But the landscaper who is illegally and knowingly breaking the law by not claiming his income we are okay with. Kind of an odd double standard.

  3. Insightful and witty as always, Groovy

    There is a fine line when it comes to “dodging taxes” but many years in the restaurant business as a server showed me that many people in the service sector routinely do this with a substantial percentage of their money.

    As you mentioned, low-paying or small-time gigs are perfect for hiding the money, but once you join the corporate world or start making significant profits on the books, you’ll be paying your “fair” share anyway.

  4. I am far from being perfect. I also might have cut a few corners in my life. I also do not judge people who might have to cut corners in order to feed their family. My general rule, however, is to be as honest as I can in life. little lies turn into big lies. A little stealing will turn into big stealing. A little flirting can turn into an affair. I am more comfortable with not stealing from a crook. It is just better for my serenity.

  5. Jacq

    I work my 9-5 and pay taxes on that. My side-hustle ends up with a 1099 I’ll pay taxes for.
    If someone were to give me $20-$100 cash for a one off baby-sitting or some other random task, I wouldn’t think to declare it. There are so many small transactions like -I put dinner on the card, my friend gives me cash for their part- that I don’t record.
    I’ve heard of ‘handymen’ who if they do a job ‘off the books’/non-union for a friend (or a friend of a friend) after work will ask for cash, because they do pay taxes for their 9-5. They figure it’s like being paid in beer & pizza, but the $20 let’s them choose their own. *shrug*

  6. Jover

    I’ve spent my entire career working for County government, then a small Town Government, and now State government. I have seen (with my own joblessness!) what happens when there isn’t enough tax money coming in to keep the government employees employed. Not to mention that my fellow state employees have not had a raise in 11 years, and that’s if you’re lucky enough to be considered Full Time, instead of being cheated as an “Other Personal Services” or basically full-time temp like me.
    So when I collect cash from tips or providing cash fares to/from the airport, I report it all. They are sufficient ways to legally reduce my tax bill without becoming a tax cheat/felon.

  7. “and this is how governments and countries collapse”

    I hate to admit it, but I do agree somewhat with you. Like you, I started out on the “straight and narrow” and lasted a little longer, but have grown more jaded as I get older.

    In my opinion, the problem comes down to the government doing a bunch of things people disagree with, so they don’t see a problem withholding funds.

    If the government stuck to basic tasks (roads, defense, basic policing, firefighting, etc.) I don’t think folks would be as apt to “steal from the government” because they could see the benefits.

    Yet, when the government goes beyond their basic responsibilities, then folks say “I’m not going to pay for that” and feel justified in withholding.

    Heck, Mr Thoreau went to jail back in 1848 for failure to pay taxes for the Mexican-American war. He was a definite Frugalist.

    Mr. 39 months

    • RocDoc

      Normally I enjoy your posts and agree with most of your writing. But not this one. I believe in legally avoiding taxes but not committing crimes to avoid taxes. WCI posted an entry written by his daughter Whitney a few weeks ago and even twelve your old Whitney learned to pay taxes. WCI legally avoids much taxation but still pays all he legally owes and is teaching his kids the same lessons. If you want more money, than work hard and make more. But illegally not declaring income to avoid taxes is just as bad a crime as a robber who steals from our homes. That robber should be fined and punished.

  8. I look at theses situations and offer the general guideline of be more good than evil – if you want to hide some cash from the Gov I won’t curse your soul (and would secretly pat you on the back for giving the gov less money to waste, can’t waste what they don’t have!)

    But at some point you start hurting your fellow man/women

  9. Lizzy

    Aside from the moral issues, here is a caveat about cash payments. A friend of mine worked mainly under the table her entire adult life. She and her employers were happy about it. Now she is in her 60s; she hasn’t saved anything, and will receive almost no social security.

  10. Brian Doyle

    I couldn’t agree more. I can’t understand the viewpoint of some of these responses about under reporting. If you have a garage sale do you report those earnings? Help a friend move and they drop you $20, do you call the IRS to pay your “fair” share of that money to them? Side hustle work and under the table earnings will BOOST the economy. Where do you think that cash is going? The non-taxed income almost always goes right back into the free market. Sigh, people will never stop loving government.

  11. Felisa

    I have a big problem with this post. If you don’t like government, then fix it don’t steal from it. Who do you think pays for the roads you drive on, the hospitals you go to, the public schools for your kids. I’m not saying the system is perfect, but the government is the people so you are really stealing from your fellow man. That is not FI

    • Mr. Groovy

      You’re absolutely right, Felisa. But here’s what keeps gnawing at my sense of justice. A corrupt government can cheat you, but you can’t cheat it if it’s doing some good things with the taxes it confiscates. How is this fair? It’s under no obligation to 100% honest with you, but you must be 100% honest with it? Intellectually, I know I’m wrong. Morally, I’m not so sure. Thanks for stopping by, Felisa. I really appreciate you challenging my ideas. It’s not fun. But if I can’t defend them, it’s time to rethink them.

  12. SJ

    I have a small business dog walking. In the first couple months I preferred cash so I could buy my specialized rain gear, business license, insurance and become a legitimate business just from the revenue of my services. During tax time I learned that much of those expenses are actually tax deductible so I no longer cared so much about cash. In the following years I’ve tried to be more accountable (pun intended!). I like being able to deduct milage on my car, little thank you notes and chocolates I give to my clients and dog treats. I’ve also been able to deduct the purchase of my electric bike, which I use mostly for my business, but also for running errands. This year I went with a new CPA that was able to figure out how much money I could contribute to my roth IRA via my SEP IRA (we’re over the income limit so we use a backdoor conversion). In the previous years the CPA I was working with never thought to mention it, which is unfortunate because I want to get as much money into my roth IRA as I can. Now I’m incentivized to claim everything because it means I can invest more: I’d rather have $2000 growing tax free in my roth than just sitting in my wallet.

    • Mr. Groovy

      Thank you, SJ. I’ve heard/read that our tax laws actually encourage Americans to start businesses. From the gist of your comment, that certainly looks to be the case. Seriously, have you ever considered start a blog? You have a keen mind and a very interesting story to tell.

  13. I’m not sure that I agree. While I will admit that I didn’t pay taxes on the cash jobs I had, I was under 18 and probably didn’t know any better at the time. But I wouldn’t advise anyone to skip paying taxes on their cash income. It is a moral and legal responsibility. If you rounded up all the taxes not being paid on cash jobs, you might just have enough to cover important needed programs, or at the very least make a small dent in the debt. And finally, if a contractor offers me a discount for paying cash, I’d take it and leave the tax responsibility up to them.

    • Mr. Groovy

      Haha! I’m not sure I agree either. I’m so torn. On the one hand, I’m a big believer in being honorable. I would never think of stealing from a fellow citizen. So why is it okay to steal from the government? On the other hand, I know our government is incredibly corrupt. And part of me keeps asking the following question: is it ethical to completely obey the laws of a corrupt government? At what point does a citizen have a moral obligation to stop funding a tyrannical organization? Is it never if the government is doing some good? Damn ethics and morality are hard. Thanks for stopping by, Gary. You gave me a lot to think about.

      • SJ

        The moment the majority of Americans believe and act on the idea that our government is throughly corrupt and tyrannical that is the moment we think and behave like developing or third world nations. If we give up we compromise our institutions, debasing both authority and integrity. What I don’t think you realize is that trust and integrity actually goes both ways. Institutions and the political class need to have faith and and find respect in populace. These old adages come to mind like, “two wrongs don’t make a right” and “treat others as you wish to be treated”. I believe that as long as we have hope and good intention then so will our leaders and our laws.

        • Mr. Groovy

          Hmmmm. Very interesting. What would be a way for each side to garner more trust and integrity? Here are my suggestions. On the citizen side, it would be nice if we citizens took a break from clamoring for more spending and actually clamored for a spending freeze. After all, would two years of “austerity” really kill us? On the politician side, it would be nice if they instituted term limits and made it unlawful for former politicians to become lobbyists. I could be wrong, but I think these two suggestions would go a long way toward restoring trust between the governed and the governing. Thanks for broaching this very important topic. It really made me think.

  14. Anette

    Don’t you want to contribute to better public schools and roads? In my mind paying cash like this is highly unethical. As a Norwegian reading a lot of personal finance blogs, I never get how some American bloggers are so against paying taxes, but at the same time don’t mind using the benefits a lower income may give you.. (as an example I just read about a millionaire taking advantage of cheaper healthcare, not saying this necessarily applies to you). Isn’t this also illegal? In my country it’s illegal to pay someone cash knowing they didn’t tell the government (and therefore contribute to the black economy). Except for the differences in “tax mentality” though, I really do like reading your blog and I am thankful for all the great content you provide. 🙂

    • Mr. Groovy

      Hey, Anette. I love your fire. And I’m deeply honored that you take the time to read this humble blog. Every thing you say makes perfect sense. And I really don’t have a good response to any of your points. But I do think I owe you an explanation on how I’ve come to my twisted views. Here we go.

      1. Yes, like most Americans, I do want better schools and roads. But here’s the rub. We’ve been spending more and more on education and roads for decades now, and nothing’s getting better. The school district I went to, for instance, now spends $25K annually per-pupil. That equates to $100K for a high school education. And the kids today are doing no better than we did on our nation’s college admission tests (SAT and ACT). So I, like many Americans, loathe additional taxes because the ROI on those taxes is obscenely poor.

      2. I am just like the millionaire you described. Mrs. Groovy and I are income poor but asset rich. And right now, our country bases healthcare subsidies solely on income, not income and assets. So Mrs. Groovy and I essentially get free healthcare. It’s totally screwed up. If I had my way, I would drastically reduce the subsidies to the well-off. Subsidies, whether they’re for healthcare, food, or housing, should only go to the poor.

      3. As far as I know, it’s not illegal in our country to pay someone in cash for work or a job. It is illegal for the recipient of that cash to not declare it on his or her tax returns. So my failure to be offended when someone hides cash income from the government is nothing but tacit approval of criminal activity. And I really have no satisfactory defense of this position. All I can say is that our country has a long history of distrusting government and romanticizing rebellion. I guess having a screw-the-government mentality is just baked into my DNA.

      Okay, Anette. That’s all I got. I hope this reply cleared some things up. Thank you so much for stopping by. I really appreciate what you had to say and your objections were spot on. Cheers.

  15. Lots of local mom and pop shops I know run on cash…hmmm. I wonder why.

    Taxes are what they are and if the government can track it they will take it. I don’t know what is right or wrong, but more power to you if you find ways to avoid them.

    • Mr. Groovy

      Agreed, DDD. I’m very conflicted with this post. Part of the reason I wrote it was to help me figure out what is right and wrong. I know cheating the government is wrong, and if everyone did it aggressively, we’d be in a world of hurt. But what about our government. It’s under no obligation to be 100% straight with us, but we have to be 100% straight with it. Call me nuts, but that just kills me. Damn morality is hard! Thanks for stopping by, my friend.

  16. Steveark

    I strongly disagree. Putting the moral issue aside you are committing a felony when you under report income and it is impossible to know what the chances of getting caught are. If you hope to someday be successful, playing fast and free with federal laws is courting disaster. What if one single dissatisfied customer of your electrician gets mad at him and calls the IRS? That could destroy his business. And then there is the moral issue which does matter to some of us as well. I have paid and still pay a ton of taxes and I resent cheaters who are basically stealing some of my tax money when they don’t pay. Keep in mind that people who are “struggling to get by” typically pay no taxes or only pay at a nominal rate.

    • Mr. Groovy

      Excellent points, Steveark. But remember, taxes don’t have to be filed until April of the following year. If our electrician had a single dissatisfied customer, he could cover his butt and simply declare the income for that particular job. The IRS would still be in the dark about every other off-the-books job he did for the tax year in question.

  17. “Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.” 26 USC 7201.

    Regardless of the ethics I can’t get on board with encouraging someone to commit a crime with this level of punishment attached. Especially someone who is struggling financially. Plus, in many states being convicted of a felony takes away your right to vote. If we think the government is corrupt or that our money is being misspent, then we should be advocating for new politicians and policy changes. Committing a felony probably won’t help.

    • Mr. Groovy

      No, no, no, Matt! You got it all wrong. I should have pointed out that off-the-books cash is really just “undocumented” income. And once something is “undocumented,” whether it’s income or foreign nationals, the laws of the United States don’t have to be adhered to.

      Sorry for the snarky response, my friend. But snarkiness is all I got.

  18. Cash is king! I’ve paid for jobs/work in cash often. Usually at a discount. The obligation is not mine to make sure a business is paying their taxes.

    I hope the IRS doesn’t come after my kids for undeclared allowance. 🙂

    • Mr. Groovy

      Cash does come in handy now then. And, thankfully, I think your kids are safe. From what I’ve read, the IRS’s enforcement budget has been getting smaller and smaller. So it’s very good at unearthing filing discrepancies (thank you automation and computers), but not so good at keeping the underground economy in check (that would require a lot more humans). Thanks for stopping by, my friend.

  19. You’re right about the corrupt, self-serving nature of our government officials. I watch House of Cards and think that it’s probably not far from reality in many ways.
    So the idea that someone earning some cash should declare it is ridiculous to me. This is especially true since there are so many tax loopholes for those with a lot of money, and as you indicated, those are the interests that are being served.

    Thanks for another great post!

    • Mr. Groovy

      Thanks, Mr. G. I know my post is fundamentally wrong, and it’s very hard to defend. But at what point do we have a moral obligation to stand up to a corrupt government? Is it never if that government does some good things? I think we’ve reached that point where the peasants should start rattling the cage a little harder. Thanks for stopping by, my friend.

  20. You don’t stop at stop signs?

    Oh, and be prepared for the audit on those taxes from 1983. ‘Cuz “Everyone Has To Pay Their Taxes!” (Great video!).

    I’ve paid cash for jobs lots of times. Gives me a lower price, and it’s not my responsibility to make sure the contractor is paying his taxes. You make a strong argument for folks who are struggling and take on a side hustle. But, as for me, I pay.

    • Mr. Groovy

      Haha! I’m actually better at stops now than when I was younger. Perhaps that’s another unexpected perk of retirement. You’re not in a rush so you’re more apt to come to a full stop at stop signs. And I hear you about the threat of being audited by the IRS for broaching this blasphemy. Perhaps I didn’t think this one through!

  21. I agree with you. I’m all for paying taxes on W-2 income, since employers have the means to easily track and report this for us. It provides a disincentive for people to pick up extra work, knowing that taxes are due on even a small amount earned.

    One of the best examples of how out of control things are is the fact that bartering is a taxable event (https://www.irs.gov/taxtopics/tc420.html). That’s insane to me and seems like a huge overreach of government.

    I’m all for tax reform but it needs to be something that truly helps people and ends the wasting of government resources. I wonder if we’ll see that in our lifetime. Probably not likely, huh?

    • Mr. Groovy

      Probably not, Kate. We’ll be forever paying for bloated government, and all those programs designed to help Americans get through rough times will only succeed in making Americans more helpless and more dependent on the government. Sigh.

  22. When “stealing from the government” isn’t someone also stealing from their fellow Americans? Less revenue means less money for people’s social security needs, and less money for schools, and less money for a ton of other social programs.

    Yes, there is quite a lot of waste in the US government. Yes, I think our taxes are too high (or more accurately mis-allocated).

    But every time someone follows your line of thinking, it is potentially putting pressure on a useful program. Sure, a few people doing it won’t matter. What if 50% of the income flows circumvented taxes though? Big trouble.

    I also personally don’t think we should just follow the rules we agree with. I’m FAR from perfect in my rule-following, but I acknowledge the need for most rules (including some level of taxation)

    • Mr. Groovy

      Excellent points, Brad. Stealing from the government is stealing from your fellow Americans. I wish I had an answer to that reality, some way to rationalize my position, but I don’t.

  23. I know plenty of people who own their own business. Cash jobs like that don’t bother me and I like doing it for some people. For the most part it doesn’t happen all that often so they are only benefiting slightly.

    The best thing you can do for a business you like is to pay in cash or check. Credit cards eat a lot of money out of small businesses. My relatives have pushed off accepting credit cards at their business as long as possible. Many mom/pop shops will give you a discount even for paying by check…if you ask.

    Ultimately everyone is stealing from the gov. Prime example…Amazon (see what i did there?).
    For the past 20+ years you were supposed to report all those purchases you made on the internet to your state gov so you could pay the sales tax Amazon didn’t have to collect.

    We are all thieves 😀

    • Mr. Groovy

      So true, BOAS. And that sober reality frightens me. What happens to a nation when it’s people lose respect for the rule of law?

  24. Hmm I’m conflicted on this one. Not reporting or under reporting income is certainly a crime. I get not reporting the $50 your neighbor gave you to paint a door or help them move. However, part of the problem with government is its inability to pay for everything it needs to and that includes support to those with lower incomes and no retirement. We need to take a hollistic look at the way we collect money and ensure we can afford the tasks we want to complete and I don’t think encouraging people to leave out income is the way to boost the economy.

    • Mr. Groovy

      Hey, Lance. I’m conflicted too. Not reporting or under reporting income is indeed a crime. But at what point do you say no to a corrupt government? I’m asking that rhetorically, of course. Part of me really believes that not reporting cash income is a form of civil protest. Is that a giant rationalization? Yes.

  25. Bahaha! I actually do agree here. Honestly it would be exhausting to track all of the cash transactions that happen in our lives. I’m not going to write a receipt and document any extra cash I earn under the table. I get that we’re supposed to, but, I mean, c’mon guys. Sorry IRS, but that’s not how it always works. And something tells me they’re raking in their money just fine anyway.

    • Mr. Groovy

      Thank you, Mrs. Picky. I’m not exactly proud of this post. But I can’t deny the sentiment. If I ever was paid for something off the books again, I wouldn’t declare it on my taxes. And, oddly enough, I make a point of being extremely scrupulous in every other aspect of my life. I guess I’m just a complicated soul.