Black Markets

As Freelancing Surges, Many Workers Move Off the Books

Slammed by taxes, they find it attractive to just duck the IRS

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One out of three American workers is now a freelancer. And some of them work in the "shadow economy," with no paper trail that the federal government can see. Why? They want to avoid taxes.

It could be the guy doing your bookkeeping or the woman designing new computer software for your firm.

Sara Horowitz founded the Freelancers Union, which now has more than 200,000 members across the U.S., all of whom report their incomes to the government and pay taxes and Social Security. But Horowitz says there's a lot of pressure to work off-the-books because freelancers often pay higher taxes than everyone else.

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  1. No, they don’t pay higher taxes than everyone else. They just actually see the entire bill, not the portion that’s hidden by the government telling Employers to pay it directly. As if the employers don’t automatically adjust the wages downward to compensate for the taxes they pay.

    Indeed, every contract employee I know gets paid a higher rate than the normal employees and part of that higher rate is explicitly to cover the full portion of FICA.

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