| Author | Message | ||
     Saintly |
I've got a question on filing an annual income tax return. I'm looking for advice or suggestions from anyone in the know. Let's say hypothetically, that a fella has worked full time at a certain job for 4 years. Each of the first 3 years he earned 36,000(gross income) and he filed his tax return immediately upon receiving his w-2 forms. He received a nice refund each time. Then, one month into the fourth year, he stopped receiving paystubs along with his salary. His net pay remained the same, and his pay envelope either contained a company check made payable to him or in a few instances it contained cash. Again, his NET("take home") pay did not increase or decrease, it remained as it had been for the past 4 years. When the employer was asked about this, it was explained that they were no longer using a salary check service (i.e. "paychex"). Fast foward to now. The employee received his w-2 forms today via mail, and upon opening them he discovered that his gross income for the entire year of 2005 was barely more that $1000 (ONE thousand) dollars. In other words, the employer took the employee(and all of the employees for that mater) "off the books" for the last 11 months of 2005 without the employees knowlege or consent. The employer, who had always deducted & paid the taxes for the employee has aparently not been doing so for some time. Furthermore, the employee MUST file a return now due to the reported income on the w-2 form, AND due to the fact that he paid over $9000.00 worth of principle & interest on his home mortgage! What should this employee do tommorrow when he arrives at work & confronts his boss? Does the employee have any legal recourse? P.S. If it matters, the employee has photocopys of half a dozen or so of the business checks that were given to him as paychecks thoughout the year. | ||
| Bigdaddy |
Saintly, Don't mess with the IRS. When they get done it won't buff out. Don't ask,,,,,,and do be prudent. G2 | ||
| No_rice |
if i gathered that right, on top of not paying the taxes he was supposed to with your money he kept it for himself? boy i wish i had a good answer for you at the moment besides to kick his a$$, but sounds like you might have to wait in line. | ||
| U4euh |
Uh, I worked at a business that went through the same thing. The only difference being, one day we were all at work when the Feds came rolling in told every body to empty building, and leave anything belonging to the business. We stood outside as they put chains on all the doors, and hauled the owner away in cuffs. We were asked what, if anything, we knew about his tax paying methods. Thank goodness he did at least keep us in the dark. I would agree, get your ducks in a row, my feeling is that it won't be very long now. On a personal note, I'd start getting my resume up to date. Even if it does work out, huh?, I wouldn't feel comfortable letting him play with my money. IMO | ||
| Lowflyer |
I would just consult a lawyer. This sort of stuff is what they are for. It sounds like if this does not get fixed immediately, you will owe taxes on what you thought was your net income. Make sure you file your taxes on time or file for extensions and then ask the IRS for deferred payments. Do as much as you can legally to defer payments while the lawyer works on the legal stuff. The important thing is to act soon and above all do not pissoff the IRS. They will likely not care about your situation with your work for what they will see that you owe. If you report the $1000 only, and get caught, you will be subject to fines, jail time, etc... Look at Richard Hatch (the first Survivor winner). | ||
| Saintly |
Bigdaddy, I'm not sure that I understand your response. Could you please elaborate? Are you saying that "employee-X" should not file? Furthermore, can an employee in this situation be help responsible to pay the IRS & state Gov. the taxes on his 36k income even though it was supposed to have been paid already? | ||
| Bigdaddy |
Saintly, I'm the very last person you'd want to ask in regards to what you need to do. I see some good advice above: attorney=good, polished resume=good; this advice is sound. I can tell you that the IRS does not play around. They take a very dim view on anything less than full disclosure. G2 | ||
| Thansesxb9rs |
When it comes to payroll, it is a big no no if you are not doing it correctly. Consult a lawyer, what he is doing is illegal. Now if you received a 1099 it is a completely different story. | ||
| Davegess |
Furthermore, can an employee in this situation be help responsible to pay the IRS & state Gov. the taxes on his 36k income even though it was supposed to have been paid already? YES. But if they did not pay withholding to the government than your gross income is what they paid you. You would pay taxes on this. Also do you have health insurance , have they paid that? Probaly not paying unemployment insurance either, so you might not get that when the ax falls, and it will fall pretty soon. Tough luck, hope you can work it out. A good Tax guy, CPA type, is the least you need. A lawyer may not be much help as you can't get blood out of a turnip and teh feds will turn this guy into a turnip pretty fast. | ||
| Lowflyer |
"A lawyer may not be much help as you can't get blood out of a turnip" True, but if you fail to get a lawyer and fail to get a suit filed early, you will guarantee yourself no compensation. | ||
| Biker_bob |
Also this could have screwed up your social security as he has to under federal law withold your 7+% and his employee 7+%. This could mess you under a disability claim. See a lawyer now! This guy needs to be reported also. You will need a new job too. They are going to get him and it won't be pretty. I would waste no time in turning this guy in. | ||
| Gbr |
Saintly, My wife is a tax accountant, and the bad news is she thinks you don't have much you can do. Her advice, find a tax attorney, and if you don't care what happens to your job or employer, contact the IRS and state unemployement and workers comp. people. The other thing is they have until Feb. 28 to mail out a 1099, so if they decieded to treat you as an independent contractor you can count on having to pay self employment tax instead. She says you may have some recourse against your employer for theft since they were withholding employement taxes that were not paid on your behalf. Sorry to hear about this. gbr | ||
| Saintly |
Gbr, What if rather that blowing the whistle, calling the IRS, lawers & such.... if I were to do nothing until Feb 28th and then make a big stink? I would still have until April 15th to file my return, and perhaps I could squeek thru without being handed a 1099 form. If I freak on him now I may cause him to try to cover his ass by using the 1099. I cant afford to pay thousands in taxes that were already deducted from my pay! That 1099 form would kill me! Plus I could at least collect 4 more paydays & try to secure a replacement job in the meantime. If I lose my job tommorow, I'll be broke as a joke. | ||
| Lowflyer |
Here is what I think I would do: Consult a lawyer as soon as possible. Do not say a word about any of this to anyone related to your work. Definitely don't freak on the boss. Do go on business as usual while you do your job search. Gather as much of your data as possible (pay stubs, paycheck copies, bank statements, tax returns, W-4s, employee handbooks, etc...) Act on this sooner rather than later. Don't worry about turning anybody in. The lawyer will likely take care of that at a time when it is most beneficial to you. | ||
| Ryker77 |
see a sneaky tax lawyer and get real advice. or play the odds. only claim that you earned 1,000. Don't itemize. don't try and write off 9,000 in home interest. Just use the standard deduction -10,000 for a married couple- -- Now the bad part.. I wouldn't worry about federal or state income tax. Your employer didn't pay into the Social security or unemployment systems-- for you. | ||
| Jlnance |
or play the odds. only claim that you earned 1,000. LOL - That would have been a better option before he posted the story on the internet. | ||
| Gbr |
Since you have till April 15 to file, it doesn't really hurt you to wait till after Feb. 28th. I don't think you want to take a chance on playing the odds, since the IRS may figure it out and come after you at any time. Then you have penalties and late fees on top of what you would owe. Play it cool, and talk to a tax lawyer to see what they say. gbr | ||
| Lowflyer |
I think the odds may be slightly in favor of getting away with it (maybe 1.02 to 1), but the price of it going the other way could be completely devastating (read: tsunami). I certainly would part with the couple grand that this might end up costing rather than risk $10k+ fines and imprisonment. Call it a life lesson. The lesson here is that the hypothetical employee is as much at fault as the boss for not calling him on this at the very first instance. The employee allowed this go on for 11 months. Federal withholding is the law and the boss broke it, but ultimately the employee is responsible for paying the tax on his earnings. The IRS will have no sympathy for him. Don't think for a nanosecond that they will not hesitate to throw his silly ass in jail if he gets caught evading taxes. | ||
| Mike_bolts |
Hmmm... technically if you've been paid cash or have been working as a contractor the company you where working for should issue you a 1099. Many do not, however if they are ever audited there would be hell to pay. I would be very concerned if I where you. Did the said employer pay social security and other taxes as is required? If not the net income that you have been receiving has just become your gross, meaning you are in a world of hurt. Consider 30+% of that gone right now. I'm with others here, see an attorney now to avoid major problems later. You have until April 15th to file so there is no rush. Don't steal, the Government hates competetion... | ||
| Fullpower |
you need a tax attorney to give you proper advice. | ||
| Cochise |
I hope this is a proper response about this thread, but on my 2001 taxes, I forgot to tell them about some bonuses that she got and in 2005 I got a letter stating that I owe back taxes, so keep that in mind. Once again, I hope this was a reasonable answer to nobody in particular's question. | ||
| Halbard |
The IRS keeps records, and maintains the right to come after you for SEVEN YEARS.... not worth trying to duck under the radar... specially not with $1,000 in income.... big red flags. And just HOW did you pay your bills???? step 1: lawyer step 2: resume step 3: run like hell step 4: well, there is no step 4... Truly, good luck. hell, if they give ya a chance to turn states evidence..... | ||
| Thansesxb9rs |
Talk with a lawyer, then file an extension to pay in April. They will ask for a good reason, this would be a good reason. If the IRS asks for a reason let them know what happened and then show them the W-2 from last year and this year. The only way he can send you a 1099 legally is if you filled out a W9. You do have options just look into them. The IRS is not the big bad wolf in this, if you can prove that you where an employee you should not be liable for the employers portion of the tax due. They will go after him for the money. You just need to prove that you where an employee. If he sent out an email or letter saying that the company is no longer going to use the company that processed the payroll any longer that would be good evidence. I would think that you would only be taxed on the gross amount of all the checks he paid you with. So, if you where thinking that he was taking out the payroll taxes your gross income is actually probably less then you think. Just talk to a lawyer, and your accountant. Even if he sends a 1099, that does not mean you will have to pay all the tax on your gross earnings plus the FICA and Medical tax. The IRS will worry about collecting that from your employer. Again this is just a suggestion and something to look into, I am not sure if the above is accurate but something worth looking into. (Message edited by thansesxb9rs on February 02, 2006) | ||
| Taxman |
i think you definately want to call a lawyer. last year your take home pay AFTER taxes was 36k. this year your take home pay BEFORE taxes was the same. he is not responsible for paying your taxes for you. if he was giving you cash or a company check that didn't show you the breakdown of the fed/state/misc witholdings then it wasn't witheld. you are still responsible for your taxes. i would not risk filing on the income of 1,000 (you don't know what his accountant is going to claim). if you end up paying taxes out of your 36k this year esentially you have made less money this year and he did not inform you of a pay drop. you need a lawyer. |
