jgarrett

Ok heres a question for any cpa's in the bunch. I did alot of carpentry work for a guy ($21,000) last year. Well at the end of the year we had a falling out and he witheld $4,400, but he said he would not 10-99 me for any of the money. I put the money in my llc bank account, so what can i do. Some say not to claim it........some say jail time. I'm searchin for answers....thanks

jay

edwinsmith

IANAL

Well, depending on whether you want to get him in trouble or not you could report him to the IRS. They kind of take it personally since he's essentially stealing from them.

If you don't want to report him to the IRS, for whatever reason... then there's probably not a lot you can do. You could sue him in small claims court I suppose.

Or you could do both.

Edwin

12valve@heart

Not a CPA or an attorney but I seem to recall hearing that you could still report the money for your taxes even w/o a 1099. As far as the $4400 goes, you'll probably have to take him to court.

runamuk

If you are not a liscensed contractor then he is not obligated to send you a 1099, and he is perfectly within his rights to withold taxes if he is a liscensed contractor.

Sorry if this is bad news. Laws are laws.

Rick

jgarrett

The $4400 is for the last job i completed that he got screwed on. I am a subcontractor. He cant come up with the cash so he TOLD me that he was gonna hold the money and not 10-99 me. so to get the money im gonna have to go to court. He is payin the tax on the money. I'll probably call the irs and ask them......rat him out.

HappyGA

you can count the 4400 as a loss if you have yur business set up. I think you can????

runamuk

You also could take a little trip to the courthouse and put a lien on the property even as a subcontractor. Then you could watch him do a tap dance

Rick

Magnum Fatboy

jg - I will do my best to answer your questions, I am a CPA, but I don't do taxes for a living. I do know enough to be dangerous though. Anyway.

1. You did work worth $21,000, but only received $16,600 ($21,000 less the $4,400 he stiffed you). You are a cash basis tax payer. Regardless of of whether he sends you a 1099 or not, you still owe taxes on the cash received. You will owe federal, state, FICA and local taxes on this money. I assume from your post that he wasn't going to 1099 you on the entire amount ($16,600) that you actually received from him???

2. Since he is not going to 1099 you for the cash income that he did pay to you, technically the IRS will not know you received this income. 1099's are required by him for any payments made to subcontractors over $600, so he is in violation of that. It doesn't matter if you are a licensed contractor or not. The IRS doesn't care. Over $600 requires a 1099. HOWEVER, if you were to get audited and they pull your bank records, they may discover that you have regular deposits with no corresponding income. They may also audit him and if he tries to find a way to deduct the payments made to you as expenses, they can and will come back on you to see if you claimed the income. Its really a crap shoot to determine if you want to risk an audit.

3. The $4,400 in cash that he stiffed you is another issue. You are a cash basis tax payer. In other words, if you didn't receive the cash, then you didn't have income to pay taxes on. You would have to sue him in small claims court to recover this. Once you do recover it, then it becomes income to you.

Hope this helps.

Geico266

Good advice ^^^^^. You must declair the income and pay the taxes. It is income tax evasion if you don't. The IRS frowns on that.


A Mechanic's lien is the way to go. They can't sell or refinance the property without paying you.

Magnum Fatboy

jgg

I reread your last post and can clarify one thing. What he is going to do is NOT claim the actual cash that he paid you as a business expense. So in essense, his taxes will be based on income that is $16,600 higher than what he could report if he chose to claim it as an expense and deduct it. Again, its not correct in the IRS's eyes but would be harder to dedect on an audit of his taxes. They could still pick it up if they audited you.

Geico266

Good advice again! MFB has nailed it.

The IRS loves subcontractors, house flippers, self employed, and anyone who uses a part of their home as a deduction (among other things). You will be audited, they will find problems (if you do your taxes yourself) and you will pay heavy taxes & penaties, interest, and if they suspect fraud they can audit everytax return you have ever filed in your life.

Don't ever screw the IRS. If they will catch you, and you will pay, big time.

rammtuff

sounds as if you have been on the wrong side of the fist.