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IMS Tax Preparation Guide By Frank Green Copley News Service Sean Crawford vividly recalls his first- foray into the underground economy. It was 1976 and the carpenter had just started what was to become a regular practice of moonlighting on weekends. He made (1,000 that year in under-the- table income. "I purposely never declared the ex­ tra cash on my tax form, mainly because I was sick to death of paying high taxes," he said. "It saved me over 1200, but I worried like hell for two years waiting for the IRS to audit me." Crawford (not his real name) has moonlighted ever since for various in­ dependent contractors -- and has evad­ ed paying taxes on the extra cash he earns. He now pockets (5JM0 to $6,000 a year -- all of it tax free -- over and above his regular $25,000 to $30,000 annual salary. Although he worried about getting caught initially, "I've never felt a pang of guilt," he said. "After all, everybody does it." Indeed, the so-called underground economy -- in which billions of dollars in earnings are being kept from the purview of the Internal Revenue Ser­ vice -- is thriving. From waiters who underreport their tips, to accountants who hide interest made on their investments, to sup­ posedly unemployed entrepreneurs operating mail-order businesses from their homes, America has its ever- increasing share of tax-dodgers. Estimates of the size and breadth of this shadow economy may vary, depen­ ding on to whom you talk. But the various figures -- anywhere from an estimated $200 billion to $450 billion a year in unreported income -- are, nevertheless, awesome. A nationwide Lou Harris poll con­ ducted in 1983 indicated that up to 30 percent of all American households in­ clude at least one member working in the underground economy. The IRS estimates that this activity lost the federal government more than $80 billion in taxes that should have been paid in 1983. Only $8 billion of this figure was at­ tributed to unpaid taxes on illicit earn­ ings from vice -- drugs, prostitution and gambling. The rest was from un­ paid taxes on unreported income earn­ ed by "corporations and your average citizens," said , IRS spokeswoman Laura Meyers. Increased penalties for convicted of­ fenders apparently haven't curbed the temptation to cheat. The IRS has, however, instituted a number of schemes to nab evaders, in- INSURED • AAA RATED • TAX-FREE INCOME Series 135 9.32%' after taxes. 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She did say that "an awful lot of peo­ ple out there are hiding income from us," adding that small-time evaders "can be extremely hard to catch." Most often, it is the little guy reaping the benefits of this tax haven. These * are people offering various services (gardening, plumbing, kuto repair) to friends and neighbors, and small- business owners. Increasingly, however, the white- collar sector of the economy -- at­ torneys, doctors, tax accountants, among other professions -- also is tak­ ing its share of slices from the tax-free pie. Four people regularly doing part or all of their business under the table were interviewed for this story. All of their names have been changed at their request. A carpenter, a beautician, a bar owner and a nurse, they each cited the same basic reasons for their moonlighting habits: hi£h taxes and the notion that an inordinate amount of the tax burden had been placed on their shoulders. "It has come down to two choices in this country," said Crawford. "You help yourself and your family, or you help the big spenders in Washington. I'm no chump." Over the last three years, bar owner Clifford Jackson estimates that he has skimmed about 5,000 tax-free dollars off the top of his earnings. He enjoys what he has come to perceive as a game of guile between himself and IRS agents. ."1 use a few techniques to foil them," he said, with a wry smile. "One method that is used overwhelmingly by bar owners is to buy a portion of liquor stock at discount liquor stores. These purchases are all unrecorded transac­ tions, unlike stock delivered by liquor distributors." On a $20 bottle of schotch, for in­ stance, Jackson can serve up to 40 drinks at about $2 each and pocket the revenues -- tax free. And on certain evenings, when business booms, he pockets the gain as unreported income. Because he works the bar alone seven days a week, the prospect of a disgruntled employee running to the IRS never has been a problem. Jackson, twice divorced and drubbed by high alimony payments, ra­ tionalizes his tax-dodging schemes by pointing to the large amount of taxes that he pays on the income that he does declare. Loretta Wilson, a part-time beauti- (Please (urn to page S3) iss-es* • Competitive Interest Rates ' 'GuaranteedMonthly Income You Can't Outlive • Monthly Deposits Accepted • Several Companies to Choose From Northern States Insurance Agency, Inc. "Your Full Service Agency" 109 Newell St. Woodstock, IL 60098 <815) 338-1124 V.