what would the penalties be for a company that never sent 1099 to there sub contractors ?? A friend of mine has worked for this company for over 8 years and they never sent him a 1099 or asked him to fill out a we 9 form. This company as far as he knows never sends any 1099 to any subs !!
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How does he document his expenses to the IRS?
Are all of his jobs off the books?
As far as I know the only way you can claim labor cost, in excess of $500 per person, is by sending a 1099, copied to IRS or by having all the paperwork for an employee (taxes, FICA insurance etc).
Just tell them he's a good bud of Charlie Rangel.
Joe H
On the other hand, building contractors are probably the most audited and punished profession in the country. Virtually every one I know has had IRS trouble and they can't figure out how they got caught.
Maybe tax education should be a required CEU.
I think that I have heard $600/per 1099 not sent out. But that might be wrong, but I don't think that it is a huge amount. But added up for all of the years and all of the number it might be hefty number.
But if these are in fact "employees" then that can end up with HUGE costs and penalties.
William the Geezer, the sequel to Billy the Kid - Shoe
Yes, $600/year per person is the limit. It person makes more than that in a fiscal year, then the CCo has to do the 1099.Iwent quite a number of years not doing even that until I got bigger, but all the guys I used always ran a real business and recorded all their income anyways. You are right. It is the ones that use "subcontractor" status when somebody is really an employee that get in teh deep end of the pool, over their heads
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I think that regardless of whether or not he ever received 1099s, he still needs to be claiming his earnings. If he turns on the employer, he better have a good history of paying for his share of earnings.
I do not receive 1099s from my two primary clients and they are major corporations for which I've been doing work for a few years.
I bill them and I am sure the use those billings as their write-off.
I am not sure that the "employer" in your friends case isn't able to treat the situation the same way... or at least have an arguable reason to do so.
Why does your friend need these 1099s now or care about what the employer has been doing with them?
I refuse to accept that there are limitations to what we can accomplish. Pete Draganic
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Since the only way they can write it off is with a 1099 I'd assume they are paying the tax.
I don't know if that is true.
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I refuse to accept that there are limitations to what we can accomplish. Pete Draganic
Take life as a test and shoot for a better score each day. Matt Garcia
It's definitely not true. You can write off anything you want as an expense, and get away with it... UNTIL the IRS comes to audit your books. Then you need to have everything in order. As far as I can tell, a lot of businesses operate as though they'll never be audited, and either skimp of the paperwork or simply cheat. Not sending a 1099 to someone who is supposed to receive one is skimping. Sending (or not sending) a 1099 to someone who is supposed to be an employee is cheating. It sounds like the OP's friend falls into the latter category--i.e. he should be an employee with a W-2--but it's hard to tell without more info.
Every year I send a batch of 1099 forms to subs. Subs that are corporations do not get one. Subs that are LLCs or sole proprietors do get one. Individuals who work under my direction are employees. It's VERY straightforward for me to determine which is which.
The tax may be cheaper than workmens comp. A lot of roofing contractors here pay cash and the tax is way cheaper than the comp.
That makes no sense. It is not an either /or situation.
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I'm saying they keep the employees off the books and pay taxes on the money they receive.
Several of them in this area have fraud cases because of it.
A policy for WC doesn't name people, at least not any I know of.
Edited 9/7/2009 2:11 pm ET by catfish
Keeping them off the books won't help when somebody gets hurt. That is often when the sheet hits the fan. The other is the disgruntled employee who was getting paid cash and no W4 or 1099 who gets fired and goes to collect unemployment compensation
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Yeah thats how they get caught. WC is 92% in FL.
Yow!
I thought it was bad in CO twenty years ago at 47%When I got my first WC policy in Gainesville in '71 or '72 it cost me $150/year flat fee as a sole prop
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WC is 92% in FL.>>>>
In what field?
roofing as of Oct 2004. haven't been interested since
Not true at all. I always wrote off subcontractors expenses and even with one aaudit did not have a problem with it. I suppose if they really wanted to throw the book at you, they could nail you on that too, but I doubt it.
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Any good IRS auditor would have followed the trail to their next victim. That's how they catch them and may have been the reason for your audit.
I know the reason for that audit, and it was not that.
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The problem with 1099 is you dont always know whos working on your jobsite and if their an out of town contractor are they paying taxes to the citys they work in .This makes a huge difference in bidding a project.
You don't need to know everyone. You 1099 the same entity that you write the check out to. If they don't provide a SS#, you don't write the check.
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Somebody needs to talk to an accountant. That's the only way to be sure.
NOT every subcontractor requires a 1099.
FOr example one stair shop I used to install for required that all of it's installers be Incorporated........................you don't send a Corporation a 1099!
SOME people believe that if an LLC is not a sole proprietor? Or a DBA? That you don't need to send them one either.
SO.................. John Smith Carpentry LLC gets a 1099......................Custom Creations Trim Carpentry LLC................ Doesn't???????????????
Like I said, someone needs an accountant. Otherwise it's all just guessing.