No one likes to pay taxes, but sometimes when you don’t pay taxes you can pay for it in the long run when it comes to Social Security benefits.
There are many types of jobs that people have, typically cash jobs, where Social Security taxes are not paid. This might increase your take-home pay, but it also reduces your Social Security benefits later in life. It can not only have an impact on the person not paying Social Security benefits, but also on the amount of benefits available in the Social Security trust funds for everyone.
A recent report from the Treasury Inspector General for Tax Administration suggests that the IRS is not doing enough to go after employers who are suspected of hiding wages and failing to report billions of dollars in federal payroll taxes, this includes Social Security and Medicare taxes.
In the report, the inspector general looked at more than 137,000 cases from 2013 in which there was a huge discrepancy between employee wage and withholding information reported to the IRS and Social Security. Of those cases, the IRS only intervened in about 17 percent of the time, possibly due to a lack of resources because the IRS budget keeps being reduced.
This means that there is potentially a huge chunk of money that Social Security is missing out on because employees and employers are taxed at a rate of 7.5 percent for Social Security purposes.
If the IRS had adequate resources to tackle this problem, it could mean much more money for the Social Security trust funds which will be facing shortages in a few years. This is a very underreported story, but an important one if people are concerned about the future of the Social Security trust funds.
