My wifes boss paid her cash but did not give a 1099. We still filed taxes but lost $1000 of dollars due to self employment tax. What should I do

As the question states my wifes boss paid her cash. Its a bar and she gets her tips plus an hourly salary. At tax time i had my wife ask for her 1099 but she was told she wouldnt get one becuase the owner had already did her books and also she didnt give tax forms to bartender since they worked for tips, i thought this was the dumbest thing i heard seeing that she did pay a hourly rate. I decided we had better file her estimated income so we wouldnt get hit with a huge fine later down the line. If I turn her into the IRS what kind of repurcussions can I expect since we did file our taxes

Asked on May 18, 2009 under Employment Labor Law, Illinois

Answers:

B. B., Member, New Jersey Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

There are a few more facts that are probably important here, but for the most part, I don't think your wife will have a problem here, since you filed a return and paid taxes.  I'm assuming your wife works as a waitress at the bar.

You should talk to a CPA or a tax law attorney about filing an amended return at some point, because you may be able to get some of that self employment tax back;  the same source will help with reporting this to the IRS. One place to look for a tax lawyer might be our website, http://attorneypages.com

It sounds like the bar owner might well be breaking the law.  A form 1099 is for an independent contractor, which is someone who works more or less on their own, and while there are some gray areas, a bar waitress isn't an an independent contractor, she's an employee.  A business with employees has to take withholding taxes and pay the employer's share for social security, etc., and calling people contractors when they aren't, to get out of paying that money, is illegal.

There is also a good chance that you can get help from the Illinois Department of Labor.  There should be a phone number for wage and hour complaints in your telephone book.

Your wife might want to start looking for another place to work, because when all of this hits the fan, the bar owner is likely to be in it up to her ears.


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