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Discussion:Tax Protester

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Discussion Forum Index --> Basic Tax Questions --> Tax Protester


Discussion Forum Index --> Tax Questions --> Tax Protester

DebP (talk|edits) said:

4 April 2014
I am doing the return of a kid of a client of mine. Should take 10 seconds - one W-2.

She sends me a long e-mail that the employer guy is a tax protester, he says his business is set up as a trust, and makes her sign the following:

According to the accountants of "X" your employment does not fall into the category of income sorce or income activity that would require federal withholding by us. This includes both federal income and withholding and withholding for Social Security or Medicare. In addition, the accountants also state that there is no requirement to contribute a matching of funds to your Medicare and Social Security Accounts.

They then proceed to refund her her portion of SS and Medicare they originally took out and "so nicely" gave her their portion of SS and Medicare. So this guy is paying money - just not to the govt. And then he tells her she can do what she wants with that - pay taxes or not. She had to sign that she actually received the money.

She is just a kid trying to make it through college I am just at a loss for words. And now my 10 second tax return seems to be more than that.

What should I do?

Ckenefick (talk|edits) said:

4 April 2014
Is any fed or state income tax showing as withheld?

Fsteincpa (talk|edits) said:

4 April 2014
At least they gave her the social security money for when she files and has to pay.

Coddington (talk|edits) said:

4 April 2014
Ask this question at Quatloos.com. They have a great deal of expertise in this subject.

Also: "Employees who are concerned that their employer is improperly withholding or failing to withhold federal income and employment taxes should report their employer by contacting the IRS at 1-800-829-1040."

DebP (talk|edits) said:

4 April 2014
There's no W-2 for this particular job. The W-2 I have is for another job and is for peanuts.

But there is no federal or state withholding. They did withhold SDI though for CA, and that wasn't returned. There is only a "register" with her net pay, and she needs to pay income taxes on that. No W-2, no nothing. He takes it out, and then gives it back - like he is trying to make them independent contractors after the fact. But he's not, because of his specially worded memo to the employees.

At the bottom of his "register" he states the federal and state taxes, but those weren't withheld because I can see her "net income" and it's just gross wages less Medicare/SS/SDI.

The refund BTW wasn't received until today for last year's stuff.

Ckenefick (talk|edits) said:

4 April 2014
There's no W-2 for this particular job. The W-2 I have is for another job and is for peanuts.

Just know that when you write stuff, we don't know anything other than what you write...You start off with "one W2" and then start in on the "employer"...and now the W2 comes from an unrelated job...anyway...

Why not just put the current year (2013) gross wages on Line 7? If 2013 gross is $5,000 and $382.50 in SS/Medicare taxes was withheld, and the $382.50 was refunded yesterday (2014), you would have essentially already taxed it if you report the $5,000 as income in 2013.

What'd you do last year (2012)? Or was this a new job in 2013?

DebP (talk|edits) said:

4 April 2014
Chris - you are right, at first I thought it was from the 1st W-2, and I delved into a bit more. My husband always tells me that no one can read my mind. Probably a good thing.

Ckenefick (talk|edits) said:

4 April 2014
Speaking of "reading," there's a Book Club Mystery that just got posted by some jackass...check it out...

Tax Writer (talk|edits) said:

4 April 2014
There's no W-2 for this particular job. The W-2 I have is for another job and is for peanuts.

Deb, as for your client, I would file a substitute Form W-2 and be done with it, under the reason, just state that the employer did not provide a Form W-2 for the employee. I've done this several times without a peep from the IRS (on my client's side, of course, I can't say if the employer was later selected for an employee classification audit or not, but that's not my problem).

Ckenefick (talk|edits) said:

4 April 2014
I wouldn't even bother with it since we're not claiming any income tax withholding...

Tax Writer (talk|edits) said:

4 April 2014
I wouldn't even bother with it since we're not claiming any income tax withholding...

But legally it's classifiable as wages, right? So the employee should be reporting her share of the Fica. How else would you do that without a substitute W-2 form? I wouldn't want to report it as self-employment income. It's not. Maybe I'm missing something obvious here.

Ckenefick (talk|edits) said:

4 April 2014
But legally it's classifiable as wages, right?

Right. I voted for Line 7 treatment.

So the employee should be reporting her share of the Fica.

Not sure what you mean by that. She will report her gross wages on Line 7, before reduction for SS/Medicare withholding.

How else would you do that without a substitute W-2 form?

You would just put it on Line 7.

I wouldn't want to report it as self-employment income

I wouldn't either.

...Employer withheld the SS/Med tax...and then, at a later date, will refund it to the employee. Or at least that's what they did for 2013. As Deb says, employer's actions, via the SS/Med refund mechanism, are basically like retroactively treating an employee as an IC. I think we would all throw the flag on that. Let the employer deal with the FICA and the IRS. No 1099 was issued, so IRS isn't looking for any S/E tax here. IRS isn't looking for any Line 7 wages either, but that's what they'll get, along with full payment of the income tax.

Spell Czech (talk|edits) said:

4 April 2014
Was it the "employer" or the "employee" who stated that the "employer" was a tax protestor?

Ckenefick (talk|edits) said:

4 April 2014
It was the parent of the child/employee.

Spell Czech (talk|edits) said:

4 April 2014
Too many "she's" and "they's".

Who told her that he is a protestor? What's she basing that on?

How can we get our hands on a copy of *the opinion* that "the accountants" gave this guy? That would be much more fun.

"But legally it's classifiable as wages, right?"
"Right. I voted for Line 7 treatment."

Based on what, other than your instinct, your experience and a likelihood that's what it is...?

Ckenefick (talk|edits) said:

4 April 2014
Yeah, I was thinking the same thing. But I have concluded that we need to dig deep into Deb's head b/c Deb's writing does not adequately express what is in her head. And I think she has good reason to believe that she believes, based on information she hasn't told us - information in *that* email from the client - that the employer is a tax protester. For one thing, this is happening out in the wild west, which comports with tax protestery type stuff. Start with TX and move west, young man. Next, Deb describes "a trust" as being the employer. And then *the* letter referencing *the accountants.*

Based on what, other than your instinct, your experience and a likelihood that's what it is...?

Based on the "ledger" that shows that SS/Med was withheld. Based on the fact that college kids that work college jobs are not in business for themselves, most likely. Based on the fact that guy is a tax protestor, withheld the tax, and then returned it. Based on everything in Deb's head that she hasn't told us. Yes, I am clairvoyant, because that definition often starts with, "a person who claims...."

If you're suggesting we put it down as S/E income, I really don't see the merit in doing so. However, in all those cases where a client bitches, after the fact, about getting a 1099 at year-end instead of a W2...well, client should know better. Client knows, or should know, that no taxes were taken out of every single paycheck. So, in those cases, I have no problem arguing for S/E treatment, especially when client is informed that employer might not appreciate a call from the IRS...

Mscash (talk|edits) said:

5 April 2014
File Form SS-8 with IRS. If there are other workers, state how many--the more there are the more IRS is liable to jump on it.

Report the income as wages using Form 8919 Send Form 3949-A to IRS because the clown probably isn't filing income tax returns of his own. Contact the state unemployment tax agency and rat him out there. They will want to audit his unemployment tax returns or go after him for them. Contact the state labor department because workers compensation insurance should also be available.

Harry Boscoe (talk|edits) said:

5 April 2014
Will the real Revenue Officer .. please stand up! My apologies to Bud Collyer. Yes, I am geezing now!

Ckenefick (talk|edits) said:

5 April 2014
Forget the SS-8, forget the 8919, forget the 4852...and everything else.

Put the kid's $1,500 of wages on Line 7 and move on.

There's no requirement for the taxpayer to do the IRS's work for the IRS.

Spell Czech (talk|edits) said:

5 April 2014
And what kind of caveats do you give the kid's parent, your client, that might protect you when you have suggested this short-cut?

Sorry, DebP, this isn't going to be the ten-second or even the ten-minute prep job, is it?

Ckenefick (talk|edits) said:

5 April 2014
And what kind of caveats do you give the kid's parent, your client, that might protect you when you have suggested this short-cut?

None, because none are needed.

Frankly (talk|edits) said:

5 April 2014
I'd go for the SS-8 and help root out this fraud. Everyone has to pay taxes. Even businessmen who lie and cheat and steal, even they have to pay taxes.

Ckenefick (talk|edits) said:

5 April 2014
I'd go for the SS-8 and help root out this fraud.

I wouldn't.

She is just a kid trying to make it through college

Why don't we just leave it at that? I do not believe DebP works for Marvel Comics and has been charged with creating a new superhero called, "The Tax Avenger." But maybe I'm wrong. And who knows, maybe the kid wants to work at the same place next year...and maybe the kid is still working there now...

This really isn't our problem. The kid got paid, report it as income, and save the super-heroing for another day...

I do have a few ideas for that, however...IRS's "Deduction Devestator" goes against the "Magical Tax Minimizer"...I envision a battle out on the water, in a *safe harbor*...

Nilodop (talk|edits) said:

5 April 2014
or a "tax haven…"

And it's Devastator.

Ckenefick (talk|edits) said:

5 April 2014
Remember, the "Tax Devestator" works for the IRS, Lenny...or shall I say, "Lottery Lenny," whose super power is mastery over playing the audit *lottery*...

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