New wife a tax cheat?

June --

Private Investigator for 16 years. This question is actually in regard to my new wife.

She's a licensed PI in CA. She has mentioned on more than one occasion that she pays no taxes, that her "expenses" exceed her income.

This sounds highly fishy, ahem, improbable to me. She seems to make about 25-35K. We have separate accounts so... Am I incorrect to be worried that she might be committing tax fraud?

Carlos
Sonoma, CA


Dear Carlos,

It is quite possible to have $25,000 to $35,000 in income and have more than that amount in expenses.

That said there is a bigger question here: How open is the relationship between you and your new wife? Don't be "worried" about tax fraud. Find out!

You say you have separate accounts. If you file a joint tax return you must both sign the return . Your signature attests to the accuracy of the return. That means that by signing you pretty much say that all the figures are accurate -- hers and yours. So it is time for you and your wife to talk money.

Ask you wife to explain her expenses to you and to show you her recordkeeping method. A client of a private investigator pays expenses as well as a fee. Perhaps your wife had one client with a $5,000 fee and $20,000 expenses. That would show as $25,000 income and immediate expenses of $20,000. Then there's all her non-reimbursable expenses.

It's not clear from your email whether you, too, are a PI. If you are, maybe you are missing a lot of expenses. You might learn some useful methods from your wife. Then again, you might about something that you will need to fix.

I'd like to hear back from you on how this goes. Your contact info will not be exposed.

Best,
June