<p>We have a little situation for which I would appreciate some insight (but if you need to bash, please refrain from submitting a response, ok?). Daughter got a job a few months ago. Presented SS card, filled out paperwork, the whole bit. Receives pay every week completely reflecting hours worked and arrangements made. Fine. I found out at the end of last week that the paperwork she filled out was for internal purposes only and that the job is actually “off the books.” On our part, it really was a misunderstanding, but the deed is done. We’re still debating whether to let her keep the job because she loves it, and as some of you know, money is tight for us because of a recent death in the family. The dilemma is this: she had put the employement on her resume (proudly, I may add) and we saw nothing wrong with that, but how will she now do her applications? If her employment shows up on her application but not in her financial aid papers, won’t that raise questions? Does she leave out the job from her applications even thought it tells an important story about how she has spent her time? We can’t include the income (I say we because I am overseeing financial documents) on her financial aid forms because there is no supporting evidence. Of course, we can’t speak to the Geezer Counselor because his standard answer is “send her to a SUNY or a CUNY and pay for it yourself.”</p>
<p>when you work independently- as a consultant or ( off the books) you keep your own records and pay your own taxes.
So all she has to do, is when she does her taxes, just put down what she earned. then she uses that info for both her FAFSA and her college application
At least that is the way I understand it</p>
<p>IF you have check stubs, that seems like “supporting evidence” or are they paying her in cash?
Are you saying they wouldn’t confirm her employment?
If so, then I agree, that job won’t help her if they are going to deny she works there.</p>
<p>I don’t see why your daughter should be penalized because her employer is cheating. He/she should have at least obtained her agreement to this arrangment before putting her in this position. I’m not sure that reporting the income on financial aid documents will cause any problems. The colleges won’t be sending data to the government. Isn’t there a paystub or some record given to her each week, or is it strictly cash?</p>
<p>One problem might be that she should report the income to the IRS, and this could trigger an audit of the employer. But if her income is low enough, she is not required to file a return, right?</p>
<p>He gives her what amounts to a personal-type check (not a payroll-type check) from the business, and then cashes it for her. Stupid idiot that I am, didn’t think that was strange because it is such a small business and I’ve never worked for one.</p>
<p>I know he would confirm that she works for him, but I’m thinking that he doesn’t pay taxes or anything for his employees, so . . . She makes very little money and since it’s seasonal employment for the most part, she may not make enough to actually have to file taxes, but I don’t want the FAFSA and the application to appear that she is lying. This has to come up sometimes, right? Don’t a lot of kids work off the books in the summer?</p>
<p>I’d guess that kids who mow neighborhood lawns or babysit don’t file tax returns. Would this be a similar situation? You might ask an accountant what the rules are, but if she’s earning less than what she’d have to pay taxes on, I’m not sure that you have to report the income. You would have to report the savings that she puts in the bank, though.</p>
<p>I’m conufsed as to why he gives her a check at all if he “cashes” it for her unless he just destroys the check. There is a limit after which an employer is supposed to give an employee (indep contracter type work) at 1099 form. I know last year my DD was given one for earning $1500. Our accountant said that since it was so little that she wouldn’t have to pay taxes on it, then it wasn’t worth filing. We did put it on the FAFSA. We didn’t put on other $ she made in cash for babysitting etc as income but obviously her savings account balance was on there.</p>
<p>My daughter is working part-time for a small business that she has worked for in the past. As is it turns out, she is getting paid exactly like your daughter is … in cash. In the past she filed taxes, but only because they took taxes out and she wanted the refund. If the total she is paid this summer amounts to $500, I will be surprised. If she gets a 1099 then you will have to file and she may owe social security and medicare, but it sounds like she will not be getting a 1099. In the absence of a 1099, there isn’t much you can do. It leaves me wondering what would happen if she were injured, because not being on the books means she is not under worker’s comp.</p>
<p>“I’m conufsed as to why he gives her a check at all if he “cashes” it for her unless he just destroys the check. There is a limit after which an employer is supposed to give an employee (indep contracter type work) at 1099 form. I know last year my DD was given one for earning $1500. Our accountant said that since it was so little that she wouldn’t have to pay taxes on it, then it wasn’t worth filing. We did put it on the FAFSA. We didn’t put on other $ she made in cash for babysitting etc as income but obviously her savings account balance was on there.”</p>
<p>He does destroy the check. My understanding is that the kids have the choice of cashing it or not, which is why the check is created. But I’m not sure. I do think talking to an accountant is the way to go, though, but I hope the admissions committees don’t think daughter is unethical.</p>
<p>I think that it would be fine for your D to regard herself as an independent contractor and to pay taxes. This would be ethical. She also probably would be getting the $ back because her income is so low anyway. She also may be able to write off any expenses connected with working there. An accountant could help her figure this out.</p>
<p>Colleges aren’t going to verify with the employer that she is working there. </p>
<p>If the employer gets into trouble with IRS, tough cookies: He lied. He may pay the penalty for that. That will not be your D’s fault, but the employer’s fault for being unethical, including being dishonest with your D from the beginning.</p>
<p>Meanwhile, if your D can find another job instead of this one, that would be perfect. Since it’s clear that the employer is not to be trusted, it would be better for her if she were working elsewhere. Who knows what else the employer is doing that could end up even hurting your D such as if his whole business and all employees get into trouble with the gov’t or others because of his illegal dealings.</p>
<p>From the IRS site’s FAQs:</p>
<p>*I am a student attending college and working part-time. Do I have to file a tax return?</p>
<p>Regardless of whether you are a student, if you are an individual who may be claimed as a dependent on another person’s return and you are single and under age 65, you must file a return if any of the following circumstances apply:
[ol]
[<em>] Your unearned income was more than $800. Unearned income includes taxable interest, dividends, capital gains, and trust distributions of interest, dividends, capital gains, and survivor annuities.
[</em>] Your earned income was more than $4,850. Earned income includes wages, tips, taxable scholarship and fellowship grants, and salaries.
[] Your total income was more than the larger of $800 or your earned income (up to $4,850) plus $250. [/ol]</p>
<p>I’m not sure that it would directly affect her financial aid situation but the real issue, as I see it, is that what this employer is doing is illegal. It matters not whether ‘a lot of people’ do it, it’s still wrong. Babysitting and mowing a few neighbor’s lawns is one thing. Working for an actual business/employer who is not filing the appropriate paperwork and taking the appropriate payroll deductions is another matter entirely.</p>
<p>Alwaysamom, we are very well aware that this situation is wrong, thus the post. What I meant by the question about other people being in the same situation was that if it did come up in the application process and daughter explained her naivete, perhaps the admissions folks would have heard of something similar and it wouldn’t automatically doom her.</p>
<p>I remember years ago, a business man was doing something similar, and his employees were cashing checks at a local pub, the back, etc. Well, he got auditied, and it created a HUGE ripple effect to those connected with him, to those that cashed small checks at the pub…it was amazing how far reaching the tenticles of the IRS went</p>
<p>If I was your daughter, I would put aside money from each check, guesstimating what the taxes… FICA, etc will be. And file a tax return. Cover her bases as an independent contractor, like say, a hairdressor or contractor would. </p>
<p>The rub is the checks. Not sure how it is best to handle the paper trail.</p>
<p>Most likely, this will be a non issue, unless she is making mucho bucks. I am sure there are hundreds of thousands of kids who make money off the books in the summer, working for dad, etc., and not all paperwork is handled properly. And I don’t imagine that the admissions people can check each and every dot.</p>
<p>That said, just get your duckies in a row with the accountant, so your daughter is protected…if her boss doesn’t do the proper paperwork, if SHE does, that is the most important thing</p>
<p>If she files as an independent contractor, she will be required to pay self employment tax, which is essentially the FICA that would have otherwise been paid, both employer and employee tax, around 15%.</p>
<p>Let sleeping dogs lie?</p>
<p>I won’t comment on ethics here, but paying off the books is so common, for a lot of reasons. Both sides gain from no tax payments. The employer is freed from some paperwork. etc. Legal? No. Ethical? only those directly involved can answer that.</p>
<p>The ethical thing to do is to report it as if she is an independent contractor. yes she will pay her 7.5 % FICA and the 7.5% that the employer does not pay. But she will have done the right thing, she can then not have to worry about when to say she has a job and when not do. She’ll never get “caught” in a lie, and if she is ever nominated for the Supreme Court or some Cabinet level position in the future, there will never be any issues about whether taxes were paid. Remember that the lack of payment-- “nanny tax” cost a few nominees for high ranking positions their nomination. The FICA of 15% will really be minimal. Then, as far as your family is concerned, the paperwork and your perception of the job is on the up and up. Just report it. IT will not be enough that income taxes will need to be paid. And she is only loosing out on 7.5 % as the other 7.5% would have been withheld anyway. Then she starts to get SS credits anyway. The employer is being unethical. No reason for her to start to be. What example will it be to her if you continue to keep the money under the table. </p>
<p>Geez, just report it and then, as far as you and D are concerned, you are at least legit.</p>
<p>“I won’t comment on ethics here, but paying off the books is so common, for a lot of reasons. Both sides gain from no tax payments. The employer is freed from some paperwork. etc. Legal? No. Ethical? only those directly involved can answer that.”</p>
<p>As I believe I stated in the original post, but perhaps didn’t make clear, we all really thought that when she filled out the paperwork, submitted her social security card, birth certificate, and working papers that she WAS employed “on the books.” We would have never, ever allowed her to take a position otherwise had we known. I’m not really interested in the ethics at this point because an honest mistake was made by our family, but in how to fix it in an above-board manner that won’t penalize a sixteen-year-old for having dumb parents.</p>
<p>“Geez, just report it and then, as far as you and D are concerned, you are at least legit.”</p>
<p>According to the standards posted above, she is waaaaay under the threshhold, so hopefully that will make things easier. We’re not talking about a lot of money here at all.</p>
<p>birth certificate?
I have never had to submit a birth certificate for a job, the SS card should cover that.</p>
<p>I may be paranoid, because I have been trying to clean up my credit from some errors that occured when a credit reporting agency apparently merged my file with someone else, but I would do a credit check to make sure she hasn’t had her identity stolen
If they weren’t going to pay her social security and all that- why would they need that stuff?</p>
<p>emeraldkity makes a good point. As I said earlier, the employer clearly are unethical, and who knows what other shady things they are doing? They basically lied to your D when they hired her, and probably lied about other things. I would not put identity theft beyond them.</p>
<p>“If they weren’t going to pay her social security and all that- why would they need that stuff?”</p>
<p>Hell if I know. Another good question to ask. Thank you. (We really didn’t see this coming.)</p>