their income. <strong>The</strong> misreporting <strong>of</strong> individual business income and related self-employment taxes accounts for more than 42 percent ($194 billion) <strong>of</strong> the taxes owed in a given year that are not paid voluntarily and in a timely manner (Bruckner, 2016). <strong>Consequences</strong> Short- and long-term financial penalties: Late payment, nonpayment, or mistakes or misrepresentations on tax forms all carry financial penalties. When taxpayers are audited by the IRS, they take on additional costs including hiring a skilled tax preparation pr<strong>of</strong>essional, paying fees, and paying interest on taxes owed, dating from the day their return was due. Accidental or deliberate mistakes on tax forms can carry penalties <strong>of</strong> between 20 and 40 percent <strong>of</strong> the amount by which taxes were underestimated. In addition, unpaid taxes can damage one’s credit score. Tax evasion, or refusal to pay taxes, is a felony carrying up to a five-year prison sentence and/or fines <strong>of</strong> up to $250,000 (Lorette, 2016; Internal Revenue Service, 2016; Internal Revenue Service, 2016a; Lazarony, 2016). Lack <strong>of</strong> financial protections in contract and freelance work: Tax avoidance in some cases may increase the attraction <strong>of</strong> contract and freelance work, moving more workers into arrangements that lack standard supports and protections such as disability insurance or workplace safety regulations. <strong>The</strong> absence <strong>of</strong> those protections can leave workers susceptible to other problems in the future (Johnson, 2016; Strom & Schmitt, 2016). BROADER COSTS OF UNPAID TAXES When ALICE workers cannot pay their taxes, not only do they face a range <strong>of</strong> penalties, but the wider community must cover the monetary gap. According to the Government Accountability Office (U.S. GAO), at the end <strong>of</strong> fiscal year 2011, individuals owed a total <strong>of</strong> $258 billion in federal unpaid tax debts. When taxes go unpaid, the rest <strong>of</strong> the community must pay more to cover both the shortfall and the cost <strong>of</strong> collection efforts (U.S. Government Accountability Office (U.S. GAO), 2012; Bruckner, 2016). FUTURE TRENDS: TAXING ALICE FAMILIES Besides the cost <strong>of</strong> household basics and the level <strong>of</strong> current wages, the tax code is another factor in the evaluation <strong>of</strong> economic inequality. According to the Federal Reserve, federal taxes help make after-tax income more equal, while state taxes make it less equal (Institute on Taxation and Economic Policy (ITEP), 2015). Reductions in state tax rates – for income tax, sales tax, or payroll taxes – could increase the income ALICE families have to afford the basic <strong>Household</strong> Survival Budget. In addition, changes in the tax structure could reduce inequality between income groups. <strong>The</strong> opportunity to avoid paying taxes will increase as the gig economy grows. More than 2.5 million U.S. taxpayers are participating in the on-demand platform economy every year, and that number is set to more than double in the next few years. As family budgets get tighter, there will also be pressure to cut corners where possible. A tax code and enforcement system not designed to capture these tax liabilities will make it easier for workers to avoid taxes in the future (Bruckner, 2016). 80 UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME
UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME 81
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ALICE: THE CONSEQUENCES OF INSUFFIC
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THE ALICE RESEARCH TEAM The United
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ALICE: BRINGING HARDSHIP INTO FOCUS
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TABLE OF CONTENTS INTRODUCTION ....
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...AND FOR ALL FAMILIES IMPACT ON T
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• The ALICE Threshold - a bare-mi
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The purpose of this report is to pr
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Figure 3. Monthly Housing Costs and
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In 2014, the U.S. states with the h
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No mother ever envisions finding he
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Long-term effects on health and wel
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friends grew to 7.7 million people
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twice as much as redevelopment of i
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UNITED WAY ALICE REPORT - THE CONSE
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Figure 5. Monthly Child Care Costs
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and accredited child care center fo
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Having a child with special needs h
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