That means you are responsible for paying taxes on those earnings. When April 15th rolled around, they were shocked to learn that they would have to come up with thousands of dollars in taxes, penalties, and interest. Whenever someone earns money from outside employment, there is also the possibility of double taxation. First the employee is taxed on his or her wages, and then, after they turn the money into the Second Foundation, the corporation issues a pro rata dividend which is taxable again. However, this means it is not applied towards group expenses and does not augment your pension fund or other benefit packages.
Outside income can also lead to a disparity in standards of living within the group.
Yes, although some employers have difficulty understanding how the Second Foundation works. In some cases, in order to clarify the work relationship to outside employers, the Second Foundation has set up separate business divisions or secondary corporations to handle the labor services of members. Contracts or subsidiary relationships between these businesses and the Second Foundation avoid the pitfall of double taxation. In lieu of Social Security, the Second Foundation recovers a percentage normally withheld and puts it aside into our own pension fund. However, members are encouraged to arrange to contribute the minimum 40 quarters of withheld earnings to Social Security in order to qualify for baseline federal benefits.