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Filing taxes (or should I say not filing) question (1 Viewer)

ghostguy123

ghostguy123

Footballguy
Just heard a whopper of a story from someone I work with.  Needless to say neither she or her live in boyfriend (been living together a decade and have a few kids together) are not very competent financially. 

Here is the situation.  Her live in boyfriend is 30 and has NEVER filed taxes in his life.  Not once.  Over the past several years he has worked some sort of delivery job which is subcontracted out, so he has never received actual pay checks.  He has receive several 1099s when he did bigger jobs (maybe 20-30 of them over the years) when he was paid by check, but never an actual paycheck. 

He currently has a job where he receives an actual paycheck, so for the first time ever uncle Sam is actually taking money from him for taxes.  He plans to file taxes this year for the first time ever. 

So what kind of crapstorm is this guy looking at if they decide to audit him?  Would they go back to every 1099 he has ever received?

Is he at greater risk for an audit right now since he finally receives a paycheck that is taxed?  If he started doing things correctly from this point on, at what point would he be out of the woods regarding all the years he never filed?

I am sure there will be more questions on my end and more information I receive from her, but just wanted to throw this out there for now.  Silly situation.  She was telling me there were thinking of buying a house when I dropped the bombshell on her that if he was going to be part of that process they would need a few years of his tax returns :wall:

 
Question.

Say you file your taxes as you normally would, except this year you received something (say gambling winnings from a poker website, or a side job as a sub contrctor) extra, like 4 grand, and a 1099 was sent to you.

If you simply never reported it on your taxes, how big of a red flag would that be?

 
Considering personal exemptions and standard deductions, I am pretty sure this guy falls in the zero tax category like nearly half Americans do.  He probably even qualifies for a rebate with the EITC.  

 
ghostguy123 said:
Question.

Say you file your taxes as you normally would, except this year you received something (say gambling winnings from a poker website, or a side job as a sub contrctor) extra, like 4 grand, and a 1099 was sent to you.

If you simply never reported it on your taxes, how big of a red flag would that be?
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The odds are high they will catch that and maybe in a few years send you a bill for assessed taxes. 

 
Maybe not as bad as I originally thought then.  It does not sound like his earnings (on paper) are anywhere close to the standard deduction in any year for the past decade.

 
ghostguy123 said:
Say this is true.

Then how does this guy go 12 years never filing a return while getting 1099s every year and not get audited?
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Because they have your tax return in their system and it will flag the 1099 not accounted for.  If his 1099's were large, they might look into it.  

 
Gotcha, makes sense.

This guy is going to file his taxes and his woman made it sound like he was going to leave out the 1099s. 

 
I think people are forgetting about social security here.  He has paid not a penny into that and he owes on both sides.

 
xulf said:
I think people are forgetting about social security here.  He has paid not a penny into that and he owes on both sides.
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The EITC is enough to cover both sides of social security and possibly still get a 'refund'.   If anything, the guy is screwing himself by not establishing SS history.  

So in his mind he is scamming the system.  The reality is he is missing out on being able to suck free money out of the system.  

 
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jon_mx said:
The EITC is enough to cover both sides of social security and possibly still get a 'refund'.   If anything, the guy is screwing himself by not establishing SS history.  

So in his mind he is scamming the system.  The reality is he is missing out on being able to suck free money out of the system.  
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Yeah, I missed the kids part.  I had thought he was single and childless.

 
ghostguy123 said:
I also didn't even think of the social security aspect.

Can he go back and do taxes for the past 10 years :shock: :thumbup:
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He can only go back three years and get the EITC.  For years prior to that he will be stuck paying 15.2% of his income in payroll taxes. 

 
jon_mx said:
He can only go back three years and get the EITC.  For years prior to that he will be stuck paying 15.2% of his income in payroll taxes. 
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Are you saying he would pay 15.2% on all of that income, or whatever income is above the standard deduction for him for those years?

 
jon_mx said:
All income.  Payroll taxes (SS and medicare) do not consider any personal exemptions or standard deductions.
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Gotcha.  So would his best move be to file for the last three years?

Or would it be best to file back as long as possible and pay what he owes?

 
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The statute of limitations never runs on an unfiled return.  I am guessing based on the dollar amounts here, the IRS either assumes they owe him money based on refundable credits like the EITC, or he's just too small-potatoes for them to chase.  

Still, always file your tax returns.  Even if you can't pay your tax bill.  I repeat - always file your tax returns.

 
Dude....

When a company prepares a Form 1099 and gives it to an independent contractor, they ALSO file a copy with the IRS and possibly the state where the business was done (depends on what exactly it was).  This is one of the ways the IRS checks people's tax returns every year (for example, if I incorrectly show $2,000 for interest income and it's actually $8,000 per the Form 1099-INT, the IRS will send me a notice asking for the additional tax due.)

This guy should start filing this year and be prepared for a possible tax bill for the prior years.

 
How much did this guy make?  I have a hard time believing that he'd have enough credits to offset the SS tax he'd have to pay.  Either this guy's been moving a lot and the IRS letters haven't been reaching him or the people sending him 1099s haven't been filing them with the IRS or they haven't been sending him 1099s at all.  In any case it's only a matter of time before #### hits the fan and this guy is likely going to owe a boatload of money.  Time for him to seek professional advice immediately.

 
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