Well I think I am in a heap of tax trouble (former employer).

[thecomputerguy]

As of January 1st 2012 I left my employment and went out on my own for various reasons. One of which was unethical business practices including taxation.

At some point early 2011 my employer came to me and said, "The business is tanking I'm going to take you off payroll, pay you a portion of what you made under the table and I want you to file for unemployment. I taking you off the books and technically firing you so the government has no way to see you receiving income. The difference of the portion you receive will be made up for in unemployment so you'll be making about the same you were before I took you off the books."

Being stupidly overly trusting and naive considering I had worked for this person for about 10 years I actually considered this. Eventually I told him hell no to unemployment but I would help him with his money issues and get paid under the table and he said, "Well now you don't have to worry about reporting the income because the government doesn't know you work here anymore."

Talking to some tax people they thought this was pretty funny, and I obviously have to report it.

So I freak out ... pop my pay that was reduced because of avoiding taxes and just cutting me a personal check into turbo tax and ...

Yay ... I owe almost $10,000 that I don't have.

I think I'm screwed.

 

[TenYardFight]

It'll be fine. Get an accountant. Make an arrangement with the government. It happens every day. This too, will pass. Good luck.

 

['putertutor]

I have been there, well not exactly the situation you are in, but I have owed far more than I could pay. The IRS, for all the foul words I can use about them, actually is pretty willing to arrange payment options for 3 years (or more under special circumstances) without any more work on your part than filling out a form.

From the brief info you gave, it does sound as though you are 'at fault' here and may need to pay off the entire amount, so definitely get an accountant to help you out, but like TenYardFight has mentioned, the bruising will fade over time. Count it as a lesson learned.

 

[PCX]

Like TYF said, make arrangements and make your payments and you will be fine. Good luck man, sorry to hear about your troubles.

 

[othersteve]

Yeah, the gov't will work with you. A business I've been involved with has been late with many tax payments before as well, and they'll give you a pretty insane amount of time to pay them as long as you stay in communication with them.

 

[Knightsman]

As of January 1st 2012 I left my employment and went out on my own for various reasons. One of which was unethical business practices including taxation.

At some point early 2011 my employer came to me and said, "The business is tanking I'm going to take you off payroll, pay you a portion of what you made under the table and I want you to file for unemployment. I taking you off the books and technically firing you so the government has no way to see you receiving income. The difference of the portion you receive will be made up for in unemployment so you'll be making about the same you were before I took you off the books."

Being stupidly overly trusting and naive considering I had worked for this person for about 10 years I actually considered this. Eventually I told him hell no to unemployment but I would help him with his money issues and get paid under the table and he said, "Well now you don't have to worry about reporting the income because the government doesn't know you work here anymore."

Talking to some tax people they thought this was pretty funny, and I obviously have to report it.

So I freak out ... pop my pay that was reduced because of avoiding taxes and just cutting me a personal check into turbo tax and ...

Yay ... I owe almost $10,000 that I don't have.

I think I'm screwed.

well get smart about it. Technically since you didnt work there, you were a sub-contractor. So that MEANS you owned your own business. Which means you get write offs.

Write off a portion of rent/morgage. Your vehicle expenses, supplies, fuel. Im sure you have a home office, you should be able to write of the square footage of your office?

get legit now, and you will look a lot better if you get audited. Get a tax id for your business name.

There are so many write offs, you just have to figure out what is best for you.

 

[AlaDes]

As of January 1st 2012 I left my employment and went out on my own for various reasons. One of which was unethical business practices including taxation.

At some point early 2011 my employer came to me and said, "The business is tanking I'm going to take you off payroll, pay you a portion of what you made under the table and I want you to file for unemployment. I taking you off the books and technically firing you so the government has no way to see you receiving income. The difference of the portion you receive will be made up for in unemployment so you'll be making about the same you were before I took you off the books."

Being stupidly overly trusting and naive considering I had worked for this person for about 10 years I actually considered this. Eventually I told him hell no to unemployment but I would help him with his money issues and get paid under the table and he said, "Well now you don't have to worry about reporting the income because the government doesn't know you work here anymore."

Talking to some tax people they thought this was pretty funny, and I obviously have to report it.

So I freak out ... pop my pay that was reduced because of avoiding taxes and just cutting me a personal check into turbo tax and ...

Yay ... I owe almost $10,000 that I don't have.

I think I'm screwed.

$10,000 is allot for you to owe. I do taxes for other people (never my own because it throws a flag with the IRS when you are self employed) and this sounds absurd to me. Who told you that you owed this? And, did your former employer give you a 1099? If not, then it's your and his word against the IRS if anything ever comes up.

 

['putertutor]

@AlaDes, You are right, $10K sounds high, but maybe he was making a lot of money at the job. Regardless, if you do other people's taxes (I did the same for many years) you should know that no matter the source of income or whether it was reported, income must be accurately calculated on returns. What it sounds like you are suggesting - that The Computer Guy simply not report the income - is not only incredibly wrong, but could land him in quite a bit more debt than he is currently facing, and possibly legal trouble as well.

@That Computer Guy - Get a reputable accountant, follow his advice, work it out with the IRS. Knightsman is right, there may be legal ways to reduce your liability and a reputable accountant can help you with them.

 

[AlaDes]

@AlaDes, You are right, $10K sounds high, but maybe he was making a lot of money at the job. Regardless, if you do other people's taxes (I did the same for many years) you should know that no matter the source of income or whether it was reported, income must be accurately calculated on returns. What it sounds like you are suggesting - that The Computer Guy simply not report the income - is not only incredibly wrong, but could land him in quite a bit more debt than he is currently facing, and possibly legal trouble as well.

@That Computer Guy - Get a reputable accountant, follow his advice, work it out with the IRS. Knightsman is right, there may be legal ways to reduce your liability and a reputable accountant can help you with them.

Yes, it would depend on how much he made, how many dependents he has, and much more.
No, I'm not advocating him to do tax evasion, but most tax preparers are going to ask him where his 1099 is for the amount he made. Then they want to know where the money came from if he doesn't have one. What, no books, but you say you made $50,000 this year? Believe this or not, but the IRS does audit for other reasons than under reporting your income. They can and will audit you for over reporting it as well. One of my very good friends who owns an H&R Block franchise won't even touch someone's taxes if they don't have a valid way of showing their income, such as written records. One example of being able to cheat the system by over reporting your income is this example: I had no income this year and I'm a single father of 3 kids. I go into a tax office, say that I made $10,000 this year. They fill out the tax forms, send them in, and wham, I get a refund of about $3,000 and never paid the first penny in. Also, I've paid into my social security without taking any money out of my pocket.

 

['putertutor]

I'm sure you and I could go back and forth for days on how many ways it is possible to trigger an audit or cheat the system, and I also know accountants who shy away from undocumented income, but that doesn't lessen the filer's responsibility to report their income. Even the over-used and over-relied upon TurboTax has a way for you to report undocumented income. And, no, I don't suggest business owner's use such software - a professional accountant is about the only acceptable option for all but my daughter's babysitting business.

The fact remains that if we are to be above board in our taxes, income needs to be accurately reported. Getting into a 'he said, she said' is not the way to go.

 

[AlaDes]

I'm sure you and I could go back and forth for days on how many ways it is possible to trigger an audit or cheat the system, and I also know accountants who shy away from undocumented income, but that doesn't lessen the filer's responsibility to report their income. Even the over-used and over-relied upon TurboTax has a way for you to report undocumented income. And, no, I don't suggest business owner's use such software - a professional accountant is about the only acceptable option for all but my daughter's babysitting business.

The fact remains that if we are to be above board in our taxes, income needs to be accurately reported. Getting into a 'he said, she said' is not the way to go.

I totally agree with you As far as you suggesting people getting an accountant; although I do my own taxes, i just don't fill in the IRS forms. I let my accountant go over them to make sure everything is right and then he prepares them. He asked me once why I just didn't do them myself. I responded with, "have you ever heard the old saying about a lawyer who represents himself has a fool for a client?" That's the way I feel about my taxes." lol

 

[YeOldeStonecat]

Yay ... I owe almost $10,000 that I don't have.

I think I'm screwed.

Go find a few different accountants...call and make appointments to talk to them. Go with the one you are most comfortable with. Don't worry about a deadline coming up...the accountant will begin the filing, and submit an extension and payment plan. Plenty of room to work here.