As a single guy living in high tax state, usually 30% - 35% of my salary goes to the government (Federal, State, Medicare, Social). As if that's not enough, they also go after my investment gains. Any short-term investment gain, bam! there goes another (25% + State) to the government. Then all the extra hard work I did to build this business, they want me to pay tax for that too. Now I've launched a online business last year. It's not much, I've gained about 4k last year. I think I'll gain 5k this year. It's not incorporated, LLC, or anything. I am the sole owner. I use a payment processes, whom didn't give me 1099 last year. it's not Paypal. I didn't report my income last for my business in year 2014. Which was about 4k (minus 1k expenses). Did my tax return and everything went through. However, my dad warned me "since you're making so much money overall, they'll always be coming after you. If you don't report, within 2 - 3 years, I'm sure they'll find out and penalize you a lot for it". The money gets deposited to my bank account so that's the only clue they have. What do you guys think I should do? Should I start reporting it? I'm starting to feel it might not be worth the risk. I used to think they'll never find out, but now I'm starting to think they'll do whatever necessary, like intrude my bank account and figure out "where this extra deposits are coming from". Most of my purchases comes from other countries, not US. About 30% of my income comes from US, rest from European counties. Is it possible I only report the income generated by US customers? What would you guys recommend? P.S. I was thinking of making another bank account and moving money there, but then again, all banks require my SSN so I feel that won't help much anyway.