Gene E. Utterback, EA wrote:
- quote -

That may be true, but the FICA tax(es) is(are) still the
EMPLOYER's problem when there is a failure to collect at the
source.

As for whether or not this is an employment vs.
self-employed situation, I thought that the person made it
clear that it was employment.

- quote -

My answer was: Unless there was a filing requirement (for
which I don't see a clear cut answer but still lean toward
that there wasn't - and certainly there wasn't for the
income tax), there is no need to file just to satisfy FAFSA.

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D. Stussy wrote:

- quote -

If I am not mistaken, the poster referred to each and every
one of his work situations as "off the books." While there
could be some debate as to what that means - or what the
poster ~thinks~ it means - I would interpret it to mean
(among other things) that no FICA (or SUI or FUTA or WC) was
paid by anyone.

MTW

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:
- quote -

My (recollection of) reading of the original post gave me
the impression that the OP was NOT EVER on anyone's payroll,
he was being paid cash, there were no withholdings and no
FICA taxes being withheld or remitted. Additionally, the OP
never filed any tax returns for any years. Subsequent
threads have alluded to the possibility of the OP being
considered self employed for tax purposes, thus creating an
SE tax issue even if the gross income received was below the
income tax filing limits.

Now that the OP wants to go back to school he needs to
provide income verification for some of the years in
question relative to the FASFA forms. So the question
becomes does he file returns for prior years and if so how
does he report his income, keeping in mind that the majority
of his work seems to have been with family.

While I agree that he should have been an employee and there
should have been withholding and W-2s, there was none. And
while I agree that he can file a return claiming to be an
employee doing so will expose his family's business to
scrutiny by the taxing authorities. On the other hand,
filing as a self employed individual will put him on the
hook for unpaid SE (FICA) taxes.

My, my, what's a person to do in such a situation?

Gene E. Utterback, EA

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MTW wrote:
- quote -

What FICA consequence? Before the family business was on
the scene, the person was an employee of an UNRELATED
employer, so of course that would have occurred in the
normal way. After the family business came on the scene, I
compute the age to be over 18 (if over 24 now), so FICA
would have been withheld (if an employee), or if the person
became the owner of the business (which isn't clear, but was
addressed in a different paragraph), then a Schedule C would
have been required - and that case mandated filing.

I don't see where the unrelated employers failed to pay FICA.

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- quote -

I'm not so sure that working "under the table" would be
under the threshold for filing!!! Could be that working
for his parents, while under the age of 18, there might have
been no filing requirement and no employment taxes would be
due. Otherwise, all of the income earned "under the table"
would be subject to employment taxes!!! Having said that,
it was not my intent to denigrate, in any way, what this
young man experienced. He is in the business of
learning!!!= The experience could bring home the
knowledge that ignorance of the law is, ordinarily, not a
good excuse!!!=(:

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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D. Stussy wrote:

- quote -

What about the FICA/SE consequence? Presumably none was
withheld or paid on his behalf.

MTW

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Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:

- quote -

We hope? More like wish. The average 25-year-old will pay
$322,000 more into Social Security than he will get out of
it. Read more here: http://www.slate.com/id/2092302

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- quote -

Report "what" income? Until the family businesses came into
the picture, the amounts disclosed were under the filing
threshold as the standard deduction by itself would have
absorbed them (and as they were earned income, we don't have
to worry about the "reduced" standard deduction).

The $40k, as an inherited sum, is not income taxable.

However, I agree that if these businesses were formerly
Schedule C, that may mean that the original poster may need
to file a return with a Schedule C, even if there's no tax
due when all is done. (Of if what was inherited by this
person was a share, a 1065 return with a 1040 flowthrough,
etc.). However, if simply an employee of another family
member who owns the business, I note that even the $125/week
is under the filing threshold ($6,300 < $7,800 for 2003).

- quote -

I think that it may already be in order. I don't see a filing requirement.

Therefore, report what you earned on the FAFSB form and add
a note: Under filing threshold - no tax return was required
nor was one filed.

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David Woods, EA, ChFC, CLU writes:

- quote -

So it would be OK with you if, say, he had just laid around
the house all those years? Then he would have had no
income, and wouldn't have evaded the system, and would have
been entitled to college subsidies?

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One thing to consider is that some government programs
require minimum pay-in periods to collect, e.g.
unemployment, disability, and pension. At age 24 and in the
peak of your facilities these may be off your radar, but
they can be surprisingly useful when you need money. $1000 -
$1500 a month unemployment desnt sound like much, but that
goes a long way in relieving anxiety in this uncertain
economy. Frequent job hoppers are excluded from
unemployement.

In my case its the pension that hurts. I was a perpetual
student "off the books" for a period of time so long I am
embarassed to state. Then I found out the amount of your
social security pay-out depends on your best 35-years of
pay-ins, of which a lot of those are going to be zero for
me. Then when you see lots of other people considering
retirement while you are trying figure out how to make up
that grand or so you are not going to get, it gets
discouraging.

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"ok_computer" <mluisi[at]optonline.net> wrote:

<snip one long story of tax evasion on part of individual and his
several employers
- quote -


I don't know whether or not you need to file a federal tax
return at that income level, buy you should at least have
been paying FICA and Medicare tax. Actually your employer
should have been deducting these from your check and paying
a matching amount as well. You may have also been required
to file a state tax return.

You should put down the truth on your FAFSA application.
IIRC your application is made under penatly of perjury.

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ok_computer wrote:

- quote -

No tax returns, no federal or state aid is what I've heard.
So then, your best course of action is to get to a local tax
pro in youor area and arrange to file returns for up to the
past six years and get right with your rich Uncle Sam.

Two advantages come to mind; 1 you qualify for federal aid
based on completed AND filed returns, and 2. you will have
paid in social security taxes which will benefit you (we
hope) in your old age.

ChEAr$,
Harlan Lunsford, EA n LA

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"ok_computer" <mluisi[at]optonline.net> wrote:

- quote -

Many people who deliberately don't file and pay their proper
tax go to prison. Sorry, I'm not offering advice for
someone to obtain government benefits based on income for
someone who has evaded the system. I know your income
wasn't substantial but at the very least you would have owed
self employment tax, if not some income tax.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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- quote -

You really shouldn't be making confessions in a public
forum. Actually, you should go back and report all of your
income for those years for which you are delinquent. In
your "confession", you have also implicated your
parents/business.

My best advice is that you say no more and get to a
professional as soon as possible to put your house in order.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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I have a question on how people who work off the books typically file
taxes, or if they do at all.

im 24 now, and ive never filed or reported my income to the state. in
high school i worked off the books, but mostly my parents supported me.
not that they had to shell out that much since i wasn't allowed to have a
car until i graduated high school. i worked several hours a week part
time at a record store to pay any bills i had. again i worked off the
books and i was really only making something like $50/wk.

after high school i attended a local community college and continued to
work off the books, again at this time i was probably making around
$60/wk, and my parents would help me out with school expenses as well as
pay my car insurance.

halfway through my second year of college a very rich family relative
passed away and left my family her entire estate. i, myself received flat
out $40,000 that was left to me exclusively in my name. shortly after my
family decided to invest the money they inherited into 2 businesses. once
those were opened i began working at them and learned the harsh realties
that a family owned business "never close" i dropped out of school
because i figured these businesses would be my "future" again a bad
decision but i can't go back and change the past. for the last 3 years
ive worked off the books for my family business, and i make approx.
$125/wk.

recently ive been looking into returning to college now that im 24 and i
would quality as an independent which would give me financial aid support
that i never could have dreamed off being a dependent on my parents.

im not sure what to put down on my FAFSA application because ive never
filed for taxes, so in theory i have no income. also im not sure if i
should in fact be filing taxes every year even tho im only making approx.
$6,500. any help would be appreciated. thanks

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