Domestic employer has unreported employees for 3 years now

[mammondee]

Is it your opinion or Unemployment's opinion that they don't qualify as IC's.

It is my opinion as well as the unemployment commission that they are household employees. They are doing domestic work, for only my client. They don't hold themselves out as a business, don't advertise to the public, and are expected to do what my client needs, with my clients tools, and how and when my client want it done! Pretty much employees!

[taxea]

None of the 16 workers appear to qualify as independent contractors. The unemployment commission has determined the one they know about (the one that filed) is an employee, and has requested the employer (my client) file the necessary paperwork to open an account.

I can't imagine a reason a 941 or 940 would be required. Am I wrong.

The client has never filed any 1099's or deducted any expenses associated with these workers on her tax return.

Now my question is if I can file the 2014 Schedule H by itself, or if the client's 2014 1040 needs to be amended to include the schedule H.

Is it your opinion or Unemployment's opinion that they don't qualify as IC's. At the cost of your client you may be able to prove they are IC's.
Just because they filed for unemployment doesn't prove they should be classified as employees.

[Rapid Robert]

"After inquiry, I have determined she has had "helpers" since before 2014. Her daughter has researched and found the check dates and amounts to the "helpers" paid in 2014 and 2015. (The bank's online data base did not go further back then 2014.) "

This seems like a big problem, both for the missing tax year(s) prior to 2014 and the argument that she has diminished capacity. How many years back does that go, how was she able to find, hire, and pay these workers on her own? It seems one should be able to get bank records more than just two years back.

[FEDUKE404]

Dealed with unemployment tax issues a problem?

I just want to emphasize what somebody else had mentioned: For any employees that earned less than $1900, a W-2 and employer taxes do not apply.

Also, I think that your client who is "86 years old failing health, and diminishing cognitive abilities" will qualify for the "reasonable cause" for not doing this, and avoid the late filing penalties.

Well, kinda. . .

Check lines C and 9 , and then Part II, of Schedule H.

Whether you can or cannot make the FICA/Medicare go away is one thing. But dealing with FUTA/SUTA shortcomings is an entirely different matter. . .and it could be painful to re$olve.

Another point to note: It may be a stretch to consider all of the "employee" expenses paid as qualifying medical expenses. More facts would be needed to clarify that issue.

FE

[TaxGuyBill]

I just want to emphasize what somebody else had mentioned: For any employees that earned less than $1900, a W-2 and employer taxes do not apply.

Also, I think that your client who is "86 years old failing health, and diminishing cognitive abilities" will qualify for the "reasonable cause" for not doing this, and avoid the late filing penalties.

[TXEA]

This is not as difficult as it seems. So, I recommend the following:

First, stop worrying about what you don't have.

File Schedule H for the years of employment. Have your client pay the employee's share of SS/Med and add that amount to box 1 wages on the W-2. This is allowed for domestic employers. If your client can pay the taxes due, have her pay them. If she can't pay them, send what she can.

Prepare the Forms W-2 with what you have (don't worry about not having SSN's or addresses). Just file the W-2's. For 2015, get as many SSN's as you can. She may be penalized, so be it.

Soon, all the dust will settle, and you will get some IRS notices. Your client is 86 and bad health - try to get the penalties abated. You probably have a better than even chance if you explain your client's situation. If any taxes are owed, then request an installment agreement request or OIC (if applicable).

Get the taxpayer advocate involved if the IRS provides no relief.

Finally, if the daughter you mentioned is the person who wrote the checks to these workers, you might prepare her for the possibility of a trust fund recovery penalty.

[Lion]

You can file Schedule H by itself with a signature. You also can amend to deduct her medical expenses. File W-2s. And, file the appropriate forms for her state.

Put the daughter to work tracing the employees. Agency? Who recommended them? Did they fill out job applications? Mail W-4s to last known address, return receipt requested. I put "refused" for SSN and keep documentation of attempts to get info. Again, have the daughter research -- or charge for your work.

[mammondee]

None of the 16 workers appear to qualify as independent contractors. The unemployment commission has determined the one they know about (the one that filed) is an employee, and has requested the employer (my client) file the necessary paperwork to open an account.

I can't imagine a reason a 941 or 940 would be required. Am I wrong.

The client has never filed any 1099's or deducted any expenses associated with these workers on her tax return.

Now my question is if I can file the 2014 Schedule H by itself, or if the client's 2014 1040 needs to be amended to include the schedule H.

[taxea]

I am with determining whether they can qualify as independent contractors before I would get into 940 or Sch H. I also agree with gathering documentation in support of a reasonable cause argument.
At the same time gather all documents needed for both 940/941 and Sch H in case you end up needing them.
Did she deduct the expenses on Sch A in the past?

[mammondee]

Look to your State reporting - that is probably the biggest issue - as your state will more than likely want the Unemployment fund contribution

Sandy

Actually, the state unemployment office SEEMS to be the least of the clients worries....They do want the Unemployment contribution and indicate a $50 per quarter late filing penalty for the last two years....= 7 quarters late x $50 = $350

The IRS on the other hand I am very worried about. The late filing penalties for the W-2 is $100 each.....ten 2014 W-2's filed late = $1,000
plus incorrect or missing TIN's 13 x $100 each = $1,300
Plus penalty and interest on amended return including schedule H amount due.....?

[S T]

Will be Schedule H for Federal - Based on 2015 Instructions - if qualified Household Employee needs to be filed if that person (household employee) was paid $ 1,900 or more of cash wages.

See IRS Pub instructions for Schedule H (Form 1040) household Employment Taxes

Look to your State reporting - that is probably the biggest issue - as your state will more than likely want the Unemployment fund contribution

Sandy

[Jiggers]

If she files 941's and 940's late, there are significant penalties.

I think she is better off filing the Schedule H. Check the instructions for filing Schedule H which is where domestic employees labor and taxes are reported.

[mammondee]

Whoa! Don't file 941's or 940's. .......
She will have tremendous penalties for not filing 941's and 940's.

I would also attempt to go the self-employed route. Especially if these domestic employees worked for others!

I'm confused because you say to NOT file 941's or 940's, but then say "She will have tremendous penalites for not filing 941's and 940's.

I do agree that Schedule H will work for the amounts due. However, I am most concerned with the lack of information for W-2's and unemployment taxes.

Also, I believe NONE of the gals working for my client were self employed. The Unemployment office has determined the one they know about (the one that filed) is an "employee".

[TaxGuyBill]

Thanks for the correction about the 941s to Schedule H. I had already spaced out the part that they were Household Employee when I started my answer.

[Jiggers]

Whoa! Don't file 941's or 940's. You file Schedule H. It is a stand-alone form that can be filed without attaching to the 1040. It has to be signed.

She will have tremendous penalties for not filing 941's and 940's.

I would also attempt to go the self-employed route. Especially if these domestic employees worked for others!