question on taxes (never filing)

Lizza · #1 10/13/11, 01:35 PM

I have an odd question that I have no idea where to ask. I have an appointment with my accountant at the end of the month for tax planning purposes (not related to this) but I don't know if he really will be able to tell me anything useful.

My husband wants to hire his friend, his friend is a good worker and is out of work, they've known each other for 25 years. The friend is almost 50 years old and has never filed a tax return but does have a social security number. I HAVE to have him as a legal employee if we hire him, that is non-negotiable. The friend is worried that if we put him on the books the IRS will come after him for never filing his tax returns. He has always worked under the table for cash. He is in a bad spot now because he has no work and needs the money. Obviously can't file for unemployment since he's never had any legal work history.

I know this is a long shot question but does anyone know what the IRS would do if I turn in my W-2's at the end of the year and here is this guy that has never filed?

Silence · #2 10/13/11, 01:54 PM

It sounds to me like you simply can't hire him- if you file your taxes showing that you hired him for pay, then they will look to see what your friend is claiming. Double check with your accountant, though.

#3 10/13/11, 02:01 PM

Give him a job as a subcontractor, pay him, send a 1099 at the end of the year. He can worry about his taxes and social security. A subcontractor must be given a job to do, and a contract(either oral or written), and not be an hourly paid employee trying to avoid the IRS and such. If you guys can work all that out, you're all good. In some states, he needs to have a license. Inexpensive here.

Lizza · #4 10/13/11, 02:19 PM

I thought about just 1099'ing him, my accountant handles all the 1099's but don't those also go to the IRS with his social security number or EIN number (of which of course he doesn't have an EIN)?

Maybe I can just use him occasionally with the 1099 and then just not hire him full time? My husband can help him out but we aren't liable for his tax situation.

Txrider · #5 10/13/11, 03:44 PM

Quote:

Originally Posted by morningstar

I have an odd question that I have no idea where to ask. I have an appointment with my accountant at the end of the month for tax planning purposes (not related to this) but I don't know if he really will be able to tell me anything useful.

My husband wants to hire his friend, his friend is a good worker and is out of work, they've known each other for 25 years. The friend is almost 50 years old and has never filed a tax return but does have a social security number. I HAVE to have him as a legal employee if we hire him, that is non-negotiable. The friend is worried that if we put him on the books the IRS will come after him for never filing his tax returns. He has always worked under the table for cash. He is in a bad spot now because he has no work and needs the money. Obviously can't file for unemployment since he's never had any legal work history.

I know this is a long shot question but does anyone know what the IRS would do if I turn in my W-2's at the end of the year and here is this guy that has never filed?

No they probably won't come after him unless they have records of W2's or 1099's saying he made money in past years.

They might next year if you file a 1099 or w2 on what you pay him. Many many people do not file for years...

ldc · #6 10/13/11, 04:10 PM

Following upon Txrider's post, it's true some people have NEVER filed. Does Mr. Morningstar's friend know that this means he won't get social security, ever? Unless he has a working wife? I would also 1099 him, b/c that relieves the employer of any tax burden. May or may not have consequences for the friend, tho.

Lizza · #7 10/13/11, 04:24 PM

Thanks for the help. My husband called another friend with a company and he said one year probably won't trigger anything (although of course no one can answer that question with any certainty). Since it would literally be the first year anyone has ever sent in a W2 for him. I'm going to have hubby talk to him about just doing the W2. I want to help him but I can't risk myself.

My husband asked him what his plan was for the future since he has nothing to fall back on (the friend is almost 50 now), he replied back, "work till he dies", hubby told him that was a bad plan. His wife is disabled and has never worked, they get no government assistance. Maybe I will ask my accountant what he does to at least to start now. It's not like they have anything or have ever made any money, they only get by week to week, and rent. If anything he has only hurt himself since he would have gotten much more in government assistance.

Thanks for the ideas.

Shadow · #8 10/13/11, 04:50 PM

Your husbands friend pays no taxes in trouble with the federal and state tax people does not pay his share of everything the taxes pay for that we all enjoy (I know they waste a lot) but we do get roads, schools, ect. He says he will just work till he dies, yes of course. He gets sick goes to the ER and they put him in the hospital and all the other tax payers pay for his treatment.
Now you help him and you want to know what my problem is. This kind of going around the law, going under the table, is a big part of our goverment woes. I am sick and tired of paying his part. If he gets caught and he will the tax people are going to audit your buisness. Tell your husband no and if he insist tell him you will not be a party to tax fraud that could cause you to lose everything you have worked for. DO NOT KICK THE SLEEPING DOG OR THE IRS.

Shadow · #9 10/13/11, 04:59 PM

You know there are programs that look for key words in emails, like bomb, explosives, IRS, tax fraud, and you are posting this on the internet and remember you will not be withholding social security on him and they come back sometime in the future and there is no statue of limitations on tax fraud. At 12 % compounded anullaly and they come back 25 years from now every dollar you should have reported and paid in becomes you figure it out, you don't have enough. again DON'T DO IT. Just my opinion

Lizza · #10 10/13/11, 05:20 PM

I think you misread my posts Shadow. I said that it was non-negotiable for me, only legal above board employees. I only posted to ask for him, what happens if he doesn't file, has never filed, and I send in a W2. I have no intention of not doing everything legal, I'm not sure where you got that I wasn't?

I guess I should clarify that by "helping" I meant giving him a job and talking to my accountant at my appointment about his situation.

Kmac15 · #11 10/13/11, 06:28 PM

This happened to an Uncle by marriage. After about 20 years of working under the table he got a "paying" job and it took 2 years before IRS was knocking on his door. He had a year to come up with $50000 or face jail.

fordy · #12 10/13/11, 06:39 PM

..................He must have been living a lifestyle where no assets of his have been attracting any attention . Just because he hasn't had any income reported with his SS number on the form doesn't mean the IRS can't prove he has been receiving taxable income . He owes self emp. tax on any net income over $400 in any given year ; as long as his income doesn't exceed his personal exemption plus his standard deduction for the year in question he wouldn't owe any federal income tax . States with personal income tax may complicate the above items .
....................Any person can give any other person a total of $12,000 per year , no tax on either side of the transaction , and no gift tax return required ! , fordy

................The gift tax amount is actually.......$13,000 per year !! , fordy

Melissa · #13 10/13/11, 06:44 PM

What if a housewife had never worked and got her first job at 50??? Maybe he was being gifted money to live on previously, the IRS doesn't know. I guess if it did trigger an audit, they could look into his situation and see if he is living ostentiously. Does he have big bank accounts? own a lot of land? Does he use a checking account? How does he show that he is paying his bills?

siberian · #14 10/13/11, 07:01 PM

Agree with the subcontractor idea. This is as long as he has his own tools, and you write it up by the job, not the hour. If he files he files,it's not on you.

jlrbhjmnc · #15 10/13/11, 07:24 PM

FYI, be very careful about treating him as an independent contractor - the IRS has a whole raft of rules about IC's and if they decide he should have been classified as an employee it could cost you. In my industry, using IC's gets messy and some business owners have been burned.

Lizza · #16 10/13/11, 08:33 PM

Quote:

Originally Posted by jlrbhjmnc

FYI, be very careful about treating him as an independent contractor - the IRS has a whole raft of rules about IC's and if they decide he should have been classified as an employee it could cost you. In my industry, using IC's gets messy and some business owners have been burned.

This is exactly my worry. I actually am year 2 into a 3 year business course and we had an entire section on "are they an employee or are they sub-contracted" and it comes back to the business who gave the 1099 if the government thinks you did something iffy. Although I would be willing to give him a job, I am not willing to do it on any bending of rules.

I guess I will wait until my appointment with my accountant and just ask him what he thought would happen if he filed for the first time in his life this year, although like I said I doubt he will give me anything useful, he can't say one way or the other.

The problem with "gifting" or anything like that, is that this is a legitimate business expense, I have my own taxes to file and this comes off the bottom line.

Kmac: Wow, that is exactly his worry, although I kind of wonder along the lines of Melissa, how can they prove he made any taxable income? Although maybe this is like guilty until proven innocent.

I really appreciate all the input. I know he needs the job badly.

Shadow · #17 10/13/11, 09:17 PM

Sorry I was just afraid you would feel he needed the money so bad you would try to bend. Thank you for doing the right thing. As for the non tax payer he has gotten by for over thirty years, The IRS will eventually catch him and you don't want any part of that. You are good people.

Molly Mckee · #18 10/13/11, 09:40 PM

If no one had sent in a w-2 or 1099 in his SS number the IRS would in all probability not even notice that he hadn't filed before. He might get a random audit or an illegal might have used his number at sometime. If he is audited, it sounds like he probably won't owe any taxes. In most cases like this the deductions are greater than the income, the auditor will take all the deductions and credits into consideration and he may actually have money coming back!

snoozy · #19 10/13/11, 10:07 PM

It is not your business to support or enable his IRS status or lack thereof. If he wants to work for you, then he needs to be either W2 or 1099. What he does with it is NOT YOUR PROBLEM.

Your problem is only to keep your company legal. If he won't work legally, then he doesn't work for you.

That was easy! Next question!...

rambler · #20 10/14/11, 03:38 AM

Quote:

Originally Posted by morningstar

This is exactly my worry. I actually am year 2 into a 3 year business course and we had an entire section on "are they an employee or are they sub-contracted" and it comes back to the business who gave the 1099 if the government thinks you did something iffy. Although I would be willing to give him a job, I am not willing to do it on any bending of rules.

I'm not a tax guy, but in my mind, either a 1099 or a W2 will pull up the same issues for the worker.

The 1099 will expose you to more grief, if the IRS asks questions, he can trip you up with the 1099 if he answers the questions wrong. The IRS seems to key in on the ind contractor stuff, so it would seem to be a bad deal for you.

--->Paul