|
Posted by Steve Foley on February 28, 2008, 10:31 am
Please log in for more thread options
John Doe gave money to his three children, Tom, Dick and Harry for college
tuition.
Now, John sends them each a 1099 and claims the money as a business
deduction. Tom, Dick, and Harry did no work for their father.
Do Tom, Dick and Harry have any recourse, or do they have to file a Schedule
C and pay income and self employment tax?
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
|
Posted by Stuart Bronstein on February 28, 2008, 10:52 am
Please log in for more thread options
> John Doe gave money to his three children, Tom, Dick and Harry for
> college tuition.
>
> Now, John sends them each a 1099 and claims the money as a
> business deduction. Tom, Dick, and Harry did no work for their
> father.
>
> Do Tom, Dick and Harry have any recourse, or do they have to file
> a Schedule C and pay income and self employment tax?
How do you know the 1099 is supposed to be for services? On occasion
I've seen parents give office equipment to their children, and lease it
back, so they could do exactly this. It allows the parent to give more
money to the kids because they are in a lower tax bracket than the
parent.
First I'd check with the parent and ask exactly what this is all about.
Then I'd ask the parent to pay the child's additional costs of tax
preparation and tax.
Stu
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
|
Posted by Harlan Lunsford on February 28, 2008, 5:42 pm
Please log in for more thread options Stuart Bronstein wrote:
>
>> John Doe gave money to his three children, Tom, Dick and Harry for
>> college tuition.
>>
>> Now, John sends them each a 1099 and claims the money as a
>> business deduction. Tom, Dick, and Harry did no work for their
>> father.
>>
>> Do Tom, Dick and Harry have any recourse, or do they have to file
>> a Schedule C and pay income and self employment tax?
>
> How do you know the 1099 is supposed to be for services? On occasion
> I've seen parents give office equipment to their children, and lease it
> back, so they could do exactly this. It allows the parent to give more
> money to the kids because they are in a lower tax bracket than the
> parent.
>
> First I'd check with the parent and ask exactly what this is all about.
> Then I'd ask the parent to pay the child's additional costs of tax
> preparation and tax.
I think it's pretty obvious from OP's message what happened here, and
that is that the father is trying to manufacturer a tax deduction. The
children should try to make father see the light and rescind the
erroneous 1099's (after all, OP said they did NO work) . Failing that,
on the childrens tax return, attach a statement to paper returns (of
course) and explain why the income is not being reported.
of course they run the risk of never getting any more... !!!!
But the bit about giving office equipment to children and then leasing
it back is a out and out sham, and will be disallowed/disregarded by IRS
upon audit when the cat's out of the bag.
ChEAr$,
Harlan Lunsford, EA n LA
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
|
Posted by Phil Marti on February 28, 2008, 5:39 pm
Please log in for more thread options "Steve Foley" wrote:
> John Doe gave money to his three children, Tom, Dick and Harry for college
> tuition.
>
> Now, John sends them each a 1099 and claims the money as a business
> deduction. Tom, Dick, and Harry did no work for their father.
>
> Do Tom, Dick and Harry have any recourse, or do they have to file a
> Schedule
> C and pay income and self employment tax?
Option 1: They ignore the 1099's when preparing their returns. When the
IRS inquires about the missing income they tell IRS the truth, that Daddy's
committing fraud. They prepare to fund the rest of their education
themselves.
Option 2: They ignore the 1099's when preparing their returns. They tell
Daddy that they're going to do so, and he probably wants to clear things up
on his end so he doesn't get accused of fraud. They prepare to fund the
rest of their education themselves.
--
Phil Marti
Clarksburg, MD
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
| Similar Threads | Posted | | Tuition expenses deduction, 1099 | April 3, 2007, 7:42 pm |
| W2 for children of sole proprietor | February 25, 2007, 5:19 am |
| pre-tax dependent care limit for 2 children | June 8, 2006, 3:01 pm |
| hiring own children in sole proprietary business | March 3, 2007, 5:07 am |
| Child Tax Credit - Newly Adopted Children | March 7, 2007, 11:45 pm |
| turfing inheritance to children who will pay less capital gains tax? | December 9, 2007, 2:41 am |
| Children received Economic Stimulus Packet | March 27, 2008, 8:47 am |
| Stimulus Package Question - low income with children | April 4, 2008, 5:43 pm |
| Proposed Regulations for Claiming Children of Divorced / Separated Parents | May 5, 2007, 6:17 am |
| Tuition deduction? | February 6, 2007, 10:36 pm |
|
|
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap