Madeline operates a janitorial service. The business is organized as a corporation. She has a crew of 100 employees that clean offices and commercial buildings on a set schedule. Madeline also runs a maid service. Since persons paying for the maid services are individuals, the amounts paid to Madeline are not reported to the IRS. Madeline has developed a tax plan. She will deposit the maid service fees to her personal bank account. As a result, she can draw a smaller salary from the janitorial service. She will pay the maids for their services through the corporation. Since she is not deducting her salary from the corporation to the extent she keeps the maid fees, she does not report income from the maid fees. Has Madeline evaded the income tax? Explain.

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The Answer of Madeline operates a janitorial service. The business is organized as a corporation. She has a crew of 100 employees that clean offices and commercial buildings on a set schedule. Madeline also runs a maid service. Since persons paying for the maid services are individuals, the amounts paid to Madeline are not reported to the IRS. Madeline has developed a tax plan. She will deposit the maid service fees to her personal bank account. As a result, she can draw a smaller salary from the janitorial service. She will pay the maids for their services through the corporation. Since she is not deducting her salary from the corporation to the extent she keeps the maid fees, she does not report income from the maid fees. Has Madeline evaded the income tax? Explain.

Madeline Operates a Janitorial Service