DH's Tax Nightmare

Re: DH's Tax Nightmare

• jtmh2012 mod

  

  March 2014

  As much as I generally recommend doing taxes yourself, you might want to find someone to do the first set for you.  Sounds like this could be a mess....:(

  
  

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• blondii428 member

  

  March 2014

  I definitely am thinking about having them done but we don't even have anything to bring to the table for him since he doesn't have a 1099.  All we have is his bank statements that show most of his checks deposited, but sometimes he cashed them and we have no record.

  

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• smerka member

  

  March 2014

  Yes he would do a Schedule C. He would do that whether he gets a 1099 or not. While doing a Schedule C isn't that hard, I would recommend that you see a professional for this first year. They will be able to tell you what expenses are claim able and what he should be keeping track of. Be aware that Schedule Cs are something the IRS looks at a lot since there can be a lot of fraud. And he will have to pay Self Employment tax in addition to regular income tax.

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• blondii428 member

  

  March 2014

  smerka said:

  Yes he would do a Schedule C. He would do that whether he gets a 1099 or not. While doing a Schedule C isn't that hard, I would recommend that you see a professional for this first year. They will be able to tell you what expenses are claim able and what he should be keeping track of. Be aware that Schedule Cs are something the IRS looks at a lot since there can be a lot of fraud. And he will have to pay Self Employment tax in addition to regular income tax.

  Thanks for the info at least I can freak out about his Dad getting him a 1099 a little bit less..
  

  

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• vlagrl29 member

  

  March 2014

  Schedule C for sure as well as the form 1040.  Honestly I would go to a CPA.  We are both self employed and rely on our CPA every year.  If he didn't give him a 1099, you can get everything accomplished on a schedule C.  He needs to keep track of everything business related (mileage, equipment, meals, etc.), because it can be deducted from his gross salary on this job.

  
  

  I hand our 1099's to all my "employee's", I had 3 this year.  To file for a 1099, he has to have made at least $600 or more in a year from his dad.  Our CPA takes care of our 1099 filing. Honestly his dad could get in trouble for not filing 1099s for his "employees".

  
  

  Keep track of his money that he makes from his dad, that way you know how much he grosses every year.

  
  

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• Erikan73 member

  

  March 2014

  I agree with going to a CPA. They can also advise you on what documentation you should keep over the course of the year as proof of income & business expenses in case you are ever audited or to make doing taxes next year easier.

  Just a reminder, if dad isn't claiming him as an employee then I'm guessing he's not withholding for other things like state or local taxes or social security. If he's not paying into social security that will impact the amount he can collect when he is old enough. You'll want to make sure you plan accordingly by putting money aside in an IRA or something of that nature.

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• blondii428 member

  

  March 2014

  Erikan73 said:

  I agree with going to a CPA. They can also advise you on what documentation you should keep over the course of the year as proof of income & business expenses in case you are ever audited or to make doing taxes next year easier.

  Just a reminder, if dad isn't claiming him as an employee then I'm guessing he's not withholding for other things like state or local taxes or social security. If he's not paying into social security that will impact the amount he can collect when he is old enough. You'll want to make sure you plan accordingly by putting money aside in an IRA or something of that nature.

  I was wondering about that.  So he still can collect some, just not as much? 

  

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• Erikan73 member

  

  March 2014

  blondii428 said:

  Erikan73 said:

  I agree with going to a CPA. They can also advise you on what documentation you should keep over the course of the year as proof of income & business expenses in case you are ever audited or to make doing taxes next year easier.

  Just a reminder, if dad isn't claiming him as an employee then I'm guessing he's not withholding for other things like state or local taxes or social security. If he's not paying into social security that will impact the amount he can collect when he is old enough. You'll want to make sure you plan accordingly by putting money aside in an IRA or something of that nature.

  I was wondering about that.  So he still can collect some, just not as much? 

  If he's paid into Social Security he will be able to collect when he is old enough. But if he has only worked for his dad & his dad never did any withholdings for that, then I'm not sure how that works. My understanding that the amount you get paid out on Social Security is impacted by the amount you pay in while working, but I'm not sure what that means for people who never paid anything into. But it's something to look into now instead of finding out when you want to retire.
  

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• OurDCLove member

  

  March 2014

  blondii428 said:

  This is my first year being married to DH and I'm trying to figure out how to file our taxes.  He works for his father's window cleaning business and in the past his parents got off by claiming him as a dependent, putting all the income under the business and paying all the taxes.  Well this year now that we're married, we're on our own.  His father tells him to file as an independent contractor (yes he really should be an emplyoee but his father wants to cop out of paying employment taxes on him), yet he has not given him a 1099 and I don't even know if he knows how to file one.  Anyone have a clue on how I should be doing our taxes?  I've heard something about doing a Schedule C form if you don't have a 1099...

  This is tax fraud on your father in law's part.

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• IAmSherlocked member

  

  March 2014

  I can't really provide much insight, but I just want to agree with PPs about getting a CPA to help you out this year and guide you on what sorts of things to keep track of for next year. I would definitely start funding a retirement account as well because of the whole social security thing.
  

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• smerka member

  

  March 2014

  When you do the schedule C, you will wind up with Self Employment tax. This is SS and Medicare. It's 15.3% (double what regular w2 employees pay because you are paying the employer and employee portions) in addition to your regular income tax. You will likely get a credit of 25% of that as adjustment to income. Assuming your DH has always worked for his parents and always been their dependent, he will have no work history with respect to SS. Your FIL has kind of screwed him over by doing this and is probably cheating on his taxes. You should have a come to Jesus meeting with your inlaws because I'm guessing that once DH starts filing on his own, the IRS is going to come calling. If your tax person lets you prepay for audit services, I would do that because you will probably be getting a letter. Or your inlaws will.

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• vlagrl29 member

  

  March 2014

  smerka said:

  When you do the schedule C, you will wind up with Self Employment tax. This is SS and Medicare. It's 15.3% (double what regular w2 employees pay because you are paying the employer and employee portions) in addition to your regular income tax. You will likely get a credit of 25% of that as adjustment to income. Assuming your DH has always worked for his parents and always been their dependent, he will have no work history with respect to SS. Your FIL has kind of screwed him over by doing this and is probably cheating on his taxes. You should have a come to Jesus meeting with your inlaws because I'm guessing that once DH starts filing on his own, the IRS is going to come calling. If your tax person lets you prepay for audit services, I would do that because you will probably be getting a letter. Or your inlaws will.

  cool.  I didn't know this and just got our taxes back today and saw we paid into it.

  
  

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• Wulfgar member

  

  March 2014

  Also, most likely everyone will want your husband to start filling quarterly tax paperwork and paying quarterly taxes.  Most States, cities, etc will give you a warning prior to charging penalties for non-payment of proper taxes.
  
  I work in a city that collects less in income taxes than where I live so I have to pay quarterly taxes because I usually owe over $300 at the end of the year.
  
  Also, as others have stated, you might want to clue in to your in-laws that the IRS may come knocking and things might not go over well for them or your husband.  Especially with unpaid SS and Medicare taxes.
  

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• blondie42107 member

  

  March 2014

  If you don't pay into Social Security, you won't receive Social Security benefits when you reach the appropriate retirement age. Some jobs, like state employees or USPS, don't pay in to Social Security but qualify for an employer pension.
  
  If you don't have enough work credits reported, and aren't paying into Medicare, you'll have to pay for Medicare Part A (hospital) unless you can claim off of a spouse who had enough credits. Medicare Part B (medical) has a monthly premium that everyone has to pay (unless low income and qualifies for an assistance program).
  
  Get a CPA and good luck!

  

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• formerlyGDaisy09 member

  

  March 2014

  So I get paid as an independent contractor to teach dance classes at a local studio.  They provide me with a 1099, and I make estimated payments quarterly...I would definitely recommend going to a CPA to get youur taxes done the first year, they can help you figure out how to calculate your estimated payments for the following year as well. 

  
  

  That said I would discuss with H and FIL whether your H truly qualifies as an independent contractor, my CPA says that this is rare. For example, as an independent contractor the dance studio can not tell me what to teach, I should not be expected to take care of anything to do with the studio besides the classes I teach, i.e. no taking out the trash, answering e-mails to the school... basically the expectations of me are I show-up with a lesson plan I design, turn the sterio on, teach the class, turn the sterio off, and leave. if they ask me to do anything else I'm then considered an employee not an independent contractor. 

  Me: 28 H: 30

  Married 07/14/2012

  TTC #1 January 2015

  BFP! 3/27/15 Baby Girl!! EDD:12/7/2015

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• Xstatic3333 member

  

  March 2014 edited March 2014

  Gdaisy09 said:

  So I get paid as an independent contractor to teach dance classes at a local studio.  They provide me with a 1099, and I make estimated payments quarterly...I would definitely recommend going to a CPA to get youur taxes done the first year, they can help you figure out how to calculate your estimated payments for the following year as well. 

  
  

  That said I would discuss with H and FIL whether your H truly qualifies as an independent contractor, my CPA says that this is rare. For example, as an independent contractor the dance studio can not tell me what to teach, I should not be expected to take care of anything to do with the studio besides the classes I teach, i.e. no taking out the trash, answering e-mails to the school... basically the expectations of me are I show-up with a lesson plan I design, turn the sterio on, teach the class, turn the sterio off, and leave. if they ask me to do anything else I'm then considered an employee not an independent contractor. 

  That's so interesting! I get a 1099 for teaching diving, and I'm not sure I'd qualify because I have to use set lesson plans (from our national organization) to ensure safety. I do choose which classes to make myself available for, though. I also have to help load and unload gear. That said , this only makes me about $1,500 a year so it shouldn't attract too much scrutiny.
  
  OP, I'm in the "come to Jesus talk" camp here. Now that he's a married adult, your FIL needs to make his son a full employee starting this year. It sounds to me like he's jeopardizing your H's social security and causing you to owe extra tax just to save a few bucks.
  
  ETA-His son, not yours!

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• formerlyGDaisy09 member

  

  March 2014

  @Xstatic3333 it is interesting. I suppose that I'm required to provide any equipment that I want to use that the studio doesn't have (I do supply my own music...yay for being able to write-off iTunes purchases). Obviously I am expected to teach with-in the dicipline that I was brought in for, so If I'm on the schedule for ballet I better not teach a hip-hop class. but they can't dictate which exercises I teach, etc. 

  $1500 probably isn't going to raise any flage....but if it's your entire income like OP's H, it might. It could cause problems for his FIL's business too if it does raise a flag. 

  Me: 28 H: 30

  Married 07/14/2012

  TTC #1 January 2015

  BFP! 3/27/15 Baby Girl!! EDD:12/7/2015

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• short+sassy member

  

  March 2014

  OP, I have a cautionary tale you can perhaps pass on to your FIL.  I worked for a tree care company in a past life.  The owner (son) had gotten into the business because his dad had owned a company for something like 20 years.  The dad had always paid his employees under the table.  No SS, no taxes withheld, no unemployment insurance.  I seriously doubt he gave them 1099s.

  Hey, worked great for 20+ years right?  And then it ALL caught up to him.  He had the IRS after him along with a number of other government agencies. Within less than a year, he lost MORE than everything.  He lost his business/source of income, he lost his house, he lost his money and STILL owed into the 6 figures.

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