Legal/Tax Advice

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Anonymous

Anonymous

I started a new job recently. It's the first business for my new employer. I am his first employee. I mostly like the job, and don't necessarily want to rock the boat.

The company has a payroll system (gusto). It seems fine and legit, but it was not set up properly when I was hired and so he paid me the first two months with a company check as a contractor. About a month ago he asked if I filed my taxes and I said not yet. He said, "please wait until I figure something out." Today he told me that he fucked up and the what he did was not technically legal. He now wants me to write a check for the two months of pay to the company. Then, he will have the payroll system write me a check for that amount so that the taxes will be taken out correctly. Then, file my taxes and do not claim any payment from my company for 2018.

I feel super gross about this and think it sounds like tax fraud. Is it tax fraud? I was technically paid for work in 2018 (one month). I won't do something illegal. I won't be able to sleep thinking that the IRS will be coming for me. I also need this job, but now I don't want to work for someone that would suggest that I do something illegal.

Any advice here?
 
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Anonymous

Anonymous

OP here. Can't I just be a contractor those months and pay the IRS my quarterly taxes or whatever? I don't see why it has to be a problem.
 
I must start off by saying I am not a tax lawyer etc etc, and all that, but this sounds like it could be handled by reporting those first two paychecks as 1099 income instead of W-2 "wage" income.

It's unfortunate that he messed it up, but that's his problem and a problem for his tax lawyer, not you.
If anything, this sounds like a scam to get you to "refund" two months' income, like he's asking to borrow two months' income and he'll pay you back later.

--Patrick
 
IANAL and definitely not in American tax systems, but...well, I know it *is* illegal to pay a fixed employee as a contractor, so in that sense it's probably impossible to go back and set up a contracting job for two months and a fixed job after that. It would have been legal if you had been a contractor, but since you weren't, it isn't.
I'd imagine the legal way of solving this would involve your boss paying some sort of fine to the IRS to regulate matters - probably less than if they found out independently. His "fix" might make it legal if it were all in one year...But claiming you weren't paid on a month you did work seems like a no-no, even if he reimburses the money in another year. It'll affect your taxes, your pension systems, whatever.
He (or his company) made the mistake, it's not on you to "fix" it. I can understand not wanting to put your new boss in a small company in trouble, but I'd suggest getting your own tax attorney/bookkeeper/accountant to look at it and try to find a way out where you are 100% in the clear (how much is left muddled on his/the company side is not really your problem, after all)
 
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Anonymous

Anonymous

Update.

I told my boss that I am uncomfortable doing as he asked. I am not a tax expert, but it sounds very much like tax fraud/negligence. He told me all i have to do is consider it a loan, and that I will pay back that loan. Then, he will pay me through the payroll system so that all the taxes are paid correctly, but for 2019 and not 2018. Then, he tells me that two other employees have done the same thing for Dec. On top of that, he said that the payroll system should have been set up earlier, but I didn't give him an important tax document. The part about the tax document is true. I failed to realize I had mail that he needed. It got lost in the shuffle of the first few weeks of work. However, shouldn't he have had payroll set up before I even joined? He said that if I refuse then the company will have to go through a big legal issue to resolve it.

The other issue is that this company has the potential for being very lucrative for me b/c it is likely that it will get bought by a major company, and I would potentially have shares in the company. However, I have no shares right now. None exist as far as I know.

I feel sick about this. While there is a possibility of a big payday, I can't stomach someone asking me to do something illegal. While I can see his point that the taxes will get paid eventually. If I get audited and I lie...

My current plan is to start applying for other work, and GTFO as quick as I can. I think I will go ahead and file my taxes and do the 1099MISC.
 
A 1099-MISC is something they are supposed to send you. If you did not actually get a 1099-MISC form, then don’t “invent” one. If you feel you must include it, report it as “other income” or whatever slot they give you for undocumented income.

—Patrick
 
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Anonymous

Anonymous

So, after talking to a few folks, I might be over-reacting. He still fucked up, and should have had payroll ready. As long as I pay the taxes, which will theoretically happen then I should be fine. I'm not a risk-taking, rule-breaking kind of guy. So, all of this is making super anxious.


However, I spoke to one of other employees and they ALREADY filed their taxes. So, legally they are in the clear.

What a damned mess.

Thanks for the info Pat. I will be having a CPA do my taxes so I don't eff it up too bad.
 
Hey I’m no CPA, but I assume taxes are a lot like coding: You can’t go and report 1099-MISC income on your return if you haven’t actually received a form and it’s “undefined.” At a minimum, the IRS computers will notice 1099 income reported on a return but no matching 1099 reported by the employer and be like FLAG THIS ONE FOR AN AUDIT, BOYS.

—Patrick
 
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Anonymous

Anonymous

So after talking to a CPA. It is legal to do as my boss suggested. He must not claim me as an employee for 2018. I guess I was freaking out over nothing. Par for the course.
 
I’m in Canada and was going to suggest that he just start paying you correctly now and remit all taxes necessary going forward as I was reading your thread.

For the part that was paid wrong, a separate payroll remission could be made to correct that. If you have underpaid on your end you could just wait until you file to pay the balance or pay extra whenever.

Thé important part is that your return is filed correctly in the end and that you report the income correctly.

Payroll errors are made all the time.

The loan part threw me off.

I’m glad this is settled for you.
 
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