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The Consequences of
Paying Somebody Off the Books
Do you have a
household employee that you pay off the books? Well if
you are one of the estimated four million households that
employ a babysitter, cleaning person, caregiver, aide or
other household employee, you may want to reconsider this
after you read this article.
No one will argue
that paying someone in your household on the books is a
chore and headache taking a chunk of your already precious
time. The monthly and quarterly tax forms as well as the
logistics around payroll are time consuming and
burdensome. Yet, most people do not realize the
consequence of their decision.
Consider for a
second why all state and federal taxing authorities offer
800 numbers to report fraud. It is big business
and anyone who reports the fraud anonymously can claim a
10% refund on any funds that are claimed as a result of
a confidential tip. It is commonly referred as the
whistleblower laws. But not all of them are on
purpose; there are many ways that you can get caught by
mistake.
What may easily
start out as a loving and trusted relationship within
one's family and household can sour over time.
I've heard many horror stories about this. Revenge
is a powerful motivator and many people feel they are
justified in pursuing this avenue when they are not
treated fairly.
It is almost
impossible to recover from this once the flood gates are
opened. Then you have to hire a lawyer and/or
accountant to mount your defense, all of which will take
a tremendous amount of time, which you are not likely to
have to begin with. To add to the bad news,
failure to report household employees (and associated
taxes) on Schedule H of your income taxes constitutes
tax fraud and there is not much of a defense you can
mount; it's what's referred to as an open and shut case.
Continuing down this path, tax fraud is a felony and if
you possess any professional credentials, you are likely
to lose them upon conviction.
At the end of the
day, is all this really worth the risk? For folks
who have been down this path, they will all consistently
say, it was one of the most horrible experiences of
their lifetime. The damage is irrevocable and you
may never be able to recover from it.
How can we forget what
happened to the career of Bernard Kerik, former New York
City Police Commissioner and President Bush's nominee for
Secretary of Homeland Security or Caroline Kennedy
Schlossberg, who had to withdraw her run for Senator
when the same situation occurred. These stories
continue to pop up in the news and will likely remain
out there until people stop thinking that this is not a
big deal.
Redlig Financial
Services LLC provides a full range of household payroll
services designed to take the pain out of the process.
Gone are the hassles and headaches with preparing a
payroll and all of the tax forms that have to be filed on
a monthly and quarterly basis. Our checklist is designed
to get you up and running in four weeks, streamlining a
logistically complicated process. To see the more
information click on the following link:
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