How would you handle this

[Kram BergGold]

My client is the leader of a 5 member rock band. I explained to him how to do everything. Now he calls me and asks can I just report the $5,000 of income on my return rather than each person reporting $1,000. What would you tell him?

[BOB W]

My client is the leader of a 5 member rock band. I explained to him how to do everything. Now he calls me and asks can I just report the $5,000 of income on my return rather than each person reporting $1,000. What would you tell him?

Paying someonelse's taxes is always questionable and strange. But I guess if it is his only income there would be no taxes, except SE taxes. Sounds like he is protecting a member(s) from showing income for other reasons, Maybe having to do with unemployment insurance or any other problem reason.

It is his tax return and for such a small amount, why not.......? Is it right? It all depends on what the $1,000 would do to the other member's tax return and if Uncle Sam is being cheated. This is a redistribution of income. Maybe like giving a low wage earner more of your income to cheat Uncle Sam from a higher tax bracket.

I guess you don't know all the issues envolved and you should follow proper proceedures and issue 1099 to the other members for $1,000 each.

[ChEAr$]

Paying someonelse's taxes is always questionable and strange. But I guess if it is his only income there would be no taxes, except SE taxes. Sounds like he is protecting a member(s) from showing income for other reasons, Maybe having to do with unemployment insurance or any other problem reason.

It is his tax return and for such a small amount, why not.......? Is it right? It all depends on what the $1,000 would do to the other member's tax return and if Uncle Sam is being cheated. This is a redistribution of income. Maybe like giving a low wage earner more of your income to cheat Uncle Sam from a higher tax bracket.

I guess you don't know all the issues envolved and you should follow proper proceedures and issue 1099 to the other members for $1,000 each.

"Redistribution of income?" Now where have I heard that advocated recently? hmmmm.

Were he my client my advise to him would be:
1. He only reports 1,000 on his return, i.e. IF he wants me to prepare the return.
For him to inflate his schedule c for the whole 5,000 would be a false return.
And I could not sign of course as preparer.

2. He should deem himself as "owner" and accordingly issue 1099-misc to the other
four. However it is not my job to insist that he issue the 1099's, for that is not an income
tax matter that would involve my signature or responsibility. Non issuance of the forms
would not preclude his taking the deduction for the 4,000.

In summary, "it depends" can't influence our recommendations.

[Bees Knees]

My client is the leader of a 5 member rock band. I explained to him how to do everything. Now he calls me and asks can I just report the $5,000 of income on my return rather than each person reporting $1,000. What would you tell him?

I would tell him exactly what is said in TTB, page 5-23:

Failing to claim all deductions related
to self-employment violates the Self-Employment Contributions
Act of 1954. The act requires every taxpayer to claim all of his or
her allowable deductions, including depreciation, in computing
net earnings from self-employment for SE tax purposes. Penalties
apply for making a false statement or representation in connection
with any matter arising under the act. (Rev. Rul. 56-407)

[Kram BergGold]

Thanks Bees

Your answer is what I wanted to hear but better put than what I would have come up with..
Mark