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Subject Author Date
What is my recourse? asielb40 01-25-2007
Posted by asielb40 on January 25, 2007, 3:02 am
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 I live in IL and have a rather complex question. I went to
work for an acquaintance of mine that runs a law firm
dealing in inter trade law. He has many degrees, but not
very 'smart' if you know what I mean. He has not paid taxes
since 1998 and the IRS caught up with him last year, but he
still has procrastinated until it was down to the wire this
year to start preparing for his audit. That is his headache
not mine, but needed background information. I came in and
got his office straightened out as best I could and have his
2006 info all ready for the accountant to prepare the return
for this year... THEN HE LET ME GO... over an email, with no
notice nonetheless.

He never had me fill out a W 9 or W 4. But he wants to
treat it as an independent contractor. He didn't take out
any taxes from my pay over the 3+ months I worked there. My
position was paid hourly with a bi-weekly pay period. My
duties were administrative assistant/ secretarial. Came in
every weekday at 8 AM most of the time 10 or 11 hrs per day
and some weekends and holidays (Saturdays and Sundays). I
answered all the phones, (we had satellite offices in NC, MI
and TX that had the phone calls go thru our main office most
of the time), reconfigured his messed up filing system,
handled NAFTA requests, handled his traveling affairs of
which he travels very frequently (airline and limo
reservations), handled billing and payroll. Then being this
was an office attached to his home, I also handled his
daughters school and activity issues from getting fees paid
to part time chauffeur, handled his mothers medication
ordering (she has beginners Alzheimer, cancer and goes to
dialysis 3 times a week and lives there) and accompanied her
to all her doctors appts. because her caregiver didn't speak
very good English and couldn't report to the family. I was
also responsible for getting the caregivers and housekeepers
(interviews and hiring) which we had a high turnover rate
due to his way of treating people.

Now with all this in mind... can I be considered an
independent contractor and since I didn't fill out a W 9,
but he plans on filing a 1099 for me... what are my tax
obligations and how should I file. Do I have any recourse?
And I am not the only one there in this predicament. There
are about 6 employees over the year that he is claiming as
independent contractors... only one had the same job as I
did (I replaced her in September 2006)

And to round off the story... looks like I am going to have
to take him to court to get my last 3 weeks of pay. I have
been gone since Jan 14th and he hasn't sent it to me or
returned any correspondence.

Advice for anyone out there... don't work for 'friends'!

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Posted by Phil Marti on January 26, 2007, 5:58 am
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> I live in IL and have a rather complex question. I went to
> work for an acquaintance of mine that runs a law firm
> dealing in inter trade law. He has many degrees, but not
> very 'smart' if you know what I mean. He has not paid taxes
> since 1998 and the IRS caught up with him last year, but he
> still has procrastinated until it was down to the wire this
> year to start preparing for his audit. That is his headache
> not mine, but needed background information. I came in and
> got his office straightened out as best I could and have his
> 2006 info all ready for the accountant to prepare the return
> for this year... THEN HE LET ME GO... over an email, with no
> notice nonetheless.

"There is no honor among thieves" still applies.

> He never had me fill out a W 9 or W 4. But he wants to
> treat it as an independent contractor. He didn't take out
> any taxes from my pay over the 3+ months I worked there. My
> position was paid hourly with a bi-weekly pay period. My
> duties were administrative assistant/ secretarial. Came in
> every weekday at 8 AM most of the time 10 or 11 hrs per day
> and some weekends and holidays (Saturdays and Sundays). I
> answered all the phones, (we had satellite offices in NC, MI
> and TX that had the phone calls go thru our main office most
> of the time), reconfigured his messed up filing system,
> handled NAFTA requests, handled his traveling affairs of
> which he travels very frequently (airline and limo
> reservations), handled billing and payroll.

I'm going to stop here and suggest you need an accountant or
enrolled agent of your own, maybe even a lawyer. You
handled payroll? You didn't see anything wrong? You could
be exposed to a lot more than your own tax liability if you
were the one who should have been seeing to the withholding
and payment of taxes.

--
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 (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Shyster1040 on January 26, 2007, 5:58 am
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You worked for him, at his place of business, on a schedule
he determined, at his direction, and under his control. You
are therefore almost certainly (99% sure) an employee and
not an independent contractor.

As such, he is required to withhold income tax and the
employee's share of payroll taxes, and also required to pay
the employer's share of the payroll taxes. Without a W-4 or
W-9, he is required to withhold from each payment he makes
to you at the highest applicable rate (without checking in
the books, probably about 28%, but I'm sure that someone
else will correct me on that one if I'm wrong).

Since he's already in audit, he'll get caught on this one
real quick, and it may very well screw up any ability he
might have to get an offer in compromise or a settlement of
his unpaid tax liabilities.

As far as your obligations are, you should fill out a
substitute W-2 (get from the IRS website, www.irs.gov) and
report your income as best as you can reconstruct from your
records (and his, if you can still get access to them, or if
you get them in discovery once you sue his sorry ass). You
will then have to pay the unpaid amounts of income tax and
the employee's portion of the payroll taxes that were not
withheld. There may be a penalty on this, but you should
discuss the matter with the IRS (start with the Taxpayer
Advocate's Office) immediately to see if you can get the
penalties waived or abated. Doing so also lets you
indirectly make sure that the IRS is aware of the fact that
your employer has not been satisfying his tax obligations.
The IRS is very harsh on employers who try to phony out of
their employment tax responsibilities.

<< ======================================================= >>
<< 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 (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by kastnna on January 26, 2007, 5:58 am
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All of the complications aside (for now), it sounds like the
first step is to determine the nature of your employment
according to the IRS. By their standards a common-law
employee does not control how or what will be done at the
job. An independent contractor has those freedoms.

If the employer is aware of a needed end result, he will
recruit the services of someone to complete that task and
achieve that desired result. You are a common-law employee
if you are required to follow the employer's guidelines or
"methods" to achieve that goal. If you are given the end
goal but allowed to use your own methods or systems to reach
that goal you can be considered an independent contractor.
It is somewhat of a vague area by IRS standards.

From the sound of it, had your job been limited to handling
his pending audit by any means you saw fit, you could have
been an IC (you were basically an outside consultant). This
is especially true if you employment was understood to end
when the job/audit was complete (which doesn't sound like
the case). If your employment was to continue you may have
been more of an "office manager", which is not usually an
IC. Your assistant-like role in dealing with the family also
lends itself to common-law employment.

Because we do not know every detail of the situation, you
should read the sites below. They outline the basic rules
for being IC or employee.

http://www.irs.gov/businesses/small/article/0,,id=99921,00.html
http://www.irs.gov/taxtopics/tc762.html

Good luck.

<< ======================================================= >>
<< 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 (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by John D. Goulden on January 26, 2007, 5:58 am
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<OP (and others) worked full time for "friend" with no
income tax withheld from pay; "friend" wants to treat these
employees as independent contractors and give them 1099s
rather than treat them as full-time employees>

You ask what your tax obligations might be. Regardless of
how this plays out, you declare the income regardless of how
it is reported on whatever flavor of 1040 you use, and you
are liable for federal, state, and local income taxes on
that income.

If you are an independent contractor, you're also going to
owe some additional taxes related to self-employment.

You say to are going to have to sue the "friend" for salary
owed. That won't affect your tax situtation, other than that
you might be able to deduct the costs of the lawsuit (in
general, you can deduct legal expenses related to the
generation or collection of income). The contractor vs
employee issue is something that you might bring to the
attention of your state labor commission. It sounds to me
like the IRS would rule that you are an employee, not an
independent contractor, and your "friend" would be held
liable for your employment taxes.

A possibly helpful link:
http://www.irs.gov/businesses/small/article/0,,id=155756,00.html

--
John D. Goulden

<< ======================================================= >>
<< 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 (2006) - All rights reserved. >>
<< ======================================================= >>

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