, prompted by some emails from a Picket Line reader, I imagined some alternate paths in which my tax resistance experiment could go.
Today, I’ll list a few more, and I’ll take a poll: if you were me, which path would you choose?
- I stay on the path I’m on now: keeping my income low, squirreling away money in various tax-advantaged accounts, and qualifying for tax credits so as to legally eliminate my federal income tax liability, while refusing to pay self-employment tax and putting up with the added costs and inconveniences the IRS imposes for this and the knowledge that the IRS will probably be able to seize all they want from me in the end.
- I do whatever I can to withdraw everything from my retirement accounts and my Health Savings Account, knowing that this makes me liable to additional taxes and penalties, and I also clean out any other bank accounts or brokerage accounts I have, and I squirrel away the cash in some sneaky way so the IRS can’t find it. I give up on trying to live under the tax line and just refuse to pay from the get-go. If the IRS puts a lien on checks from a client or other income source, I cut that source of income off as soon as I’m able. If they drag me to court and try to compel me to disclose my booty, I defy them and laugh all the way to the pokey.
- I consult with a tax specialist, convert my sole-proprietorship into a more formal and distinct business, sell off a majority of this business to investors who agree that the business should attempt to pay no federal taxes (assuming I can find any such), pay myself next-to-nothing so as to eliminate my earned income (and therefore my self-employment tax), perhaps invest my IRA in this business, consider buying a home rather than renting, and in general, begin to structure my life in such a way that capital, loans, and investments are doing the heavy lifting rather than earned income. Give up on resisting the self-employment tax in favor of trying to no longer have any self-employment income to report.
- Give up on earning income in the above-ground economy and insist on only underground economy work. This will probably require a lot of energetic networking and searching, and may mean earning less attractive wages, but would mean that I could earn as much as I’d like without the income being visible to the IRS.
- Give up on the self-employment tax resistance and be satisfied with having eliminated my federal income tax liability. Go ahead and cut my quarterly checks to the U.S. Treasury, and devote the time and energy I was devoting to the self-employment tax to more-fruitful pursuits.
- Wait, I have an even better idea, which I’ll disclose in the comments to this page…