If I have a 1099 employee who wants me to deposit her pay into her sister’s bank account, is that legal?

I am renting my vehicle for a car service business to a driver. Her earnings will be deposited to my account from the company’s and, after I make the deductions such as rent, tickets, parking, etc., I will be depositing the remaining balance to her. She is a subcontractor so I will prepare a 1099 for her next year. However, she wants me to deposit her balance to her sister’s account because of her debt problems. We have an rental agreement as well. Can I write the reimbursement check to her name so she can deposit it to her sister’s account or should I write the check to her sister’s name and put an explanation?

Asked on July 13, 2015 under Employment Labor Law, New York


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

You do not want to be a party to what could be tax fraud (if it's not reported properly) or a knowing effort to defraud creditors. Write the check to the employee; she can then endorse it over to whomever she likes, but whatever she does, it will be her action, not yours.

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