Thursday, April 28, 2011


Hi Larry, I know in your travels working with hair salons and owners in the industry, you must come across these issues. I know a gal that used to work in my salon that thankfully went to another salon where she can sell her own retail. She told me she purchases it wholesale at the distributor house and pays tax there on the wholesale because she does not have a resale license. She then sells it to her clients and they pay tax to reimburse her but she does not pay state sales tax. She also is on social security so is hiding income in her sisters account so as not to make over the limit you can make legally. She said she has a really good accountant that is helping her. I wish I did not know all this information, but since I do, what should I do with it? There is a part of me that feels like an accomplice by not reporting her. Then I also believe in, "the wheels of God grind slowly but finely" and leave it alone and walk away. I have known her for many years but did not know she was like this till she worked in my salon. I had to let her go as I felt I could not trust her. It seems like almost every hairdresser that I know that is a booth renter, at least where I work, hides money from the IRS and they talk about it. I do not believe that is honest nor has integrity. Am I just stupid not to do that? I report everything, even my tips. I am not trying to sound self righteous. That is how I was raised. I really struggle financially to pay all that I owe, they all are going on vacations and buying new cars. I am sorry if this sounds petty but I see it as a huge issue in our least where I live. Thanks for your input.

Isn’t it frustrating doing everything right and then find out that others are not playing by the rules. This girl could have some real problems. Regarding the state sales tax what she is doing is wrong, wrong, wrong. The state is getting cheated out of part of the tax. For example she buys the product for $10.00 and pays 70 cents in tax. Then she sells the product for $20 and should be collecting $1.40. The state is out of 70 cents. She is committing a criminal act by not reporting all of her income and is subject to jail time. I am aware of people that are in jail for not reporting all of their income. This is a further problem because she is improperly collecting social security benefits. Shame on her. What can you do? That is tough. If you tip off the IRS you will not know if they have taken any action or not unless she tells people. The IRS is required to be very private about audits unless it goes to court and becomes public record. And, as you can imagine the IRS can be a little skeptical of informants unless they have proof. I would presume that jilted lovers and disgruntled ex employees contact the IRS just to cause havoc. Here is a possibility. There is a new Web site that lets people leave anonymous tips about tax cheats and are forwarded to the Internal Revenue Service. The site,, is aimed at people who want to report tax cheating by others, but wish to remain anonymous. They will not be able to qualify for the IRS’s whistleblower awards, but in most cases they would not be able to qualify anyway. The IRS only pays whistleblowers if the case involves a business that owes over $2 million in taxes, or an individual who earns $200,000 or more a year. The site is run by a retired IRS agent, Al Drucker of Manalapan, N.J.