1099 Tax questions HELP PLEASE?

1099 Tax questions HELP PLEASE?
My husband is a musician. He played with a brother in the band. The establishment in which they worked would pay his brother (W-9) in his brothers name. Then his brother would write him personal check for his portion of the pay. Come to find out his brother has not filed tax returns for ten years! Now he is telling my husband that he is going to the irs and he is filing taxes for the previous years and is going to 1099 my husband for the amount past due. I filed my husband ( we was not married so I filed signle and him as a dependent cause I paid all his bills) as a dependent last year he did not have any income other than these few which was not on a w-2 or w-9 or 1099 in his name gigs. I thought that in this situation wouldnt the brother be an employer if he is going to try to say he paid my husband for work and there for this would not quailify a 1099. My husband did not file taxes for 2008 again no income on w-2 w-9 or 1099 and he was injured so did not have a job. Please let me know what you think can happen in this situation can the brother force my husband to pay taxes? My husband has only not filed for four years the rest of the time he filed because he had a regular job. 2009 the brother has decided to eat the taxes because he does not have proper records to prove everything. 2008 my husband had under 3600 for the total year so should he go back and file that He did live with me for the entire year in 2009. I provided all support.


Answers:

WRG:  Your husband owes taxes on all the money his brother payed him. It is really that simple. When the brother reports what he paid to the IRS he will have no choice but to give them your husband's info or he will be the one paying the tax.
2010-12-02 12:05:19
the tax lady:  Slow down. When your husband filed his taxes, he reported his income on his personal schedule C, right? If so, the fact that the 1099-Misc forms are 10 years late is a non-issue. The IRS views keeping track of self-employment as the obligation of the person making the money, not the person paying them. But, I see that you and your husband are tax ostriches. If he didn't get a form, he didn't report it. Bad move. The IRS is going to see these 1099-Misc forms (common and legal in music gigs) and audit your husband to see if he reported the income. Since he didn't, you have two problems. The forms may be incorrect and your husband will not have the records to prove they are wrong. At a minimum, 1099-Misc income triggers 15.3% self employment tax. If he had other income, he may also have owed income tax. If this represents more than 25% of his income, the IRS statute is 6 years, not 3. (And fraud--which this is--technically has no statute, but the IRS usually backs off after 6 years.) The amount owed will double due to penalties in interest.
2010-12-02 12:07:19
Chosen Answer
tro:  if the brother got the money for the gigs, he should have issued 1099's to each member of the band each year apparently this has not been done for a number of years, and how your husband filed before you got married is anyone's guess, does he know? and your filing single with him as a dependent would depend on a number of requirements--he had to have lived in your household the ENTIRE year, did not earn $3650, you provided more than 50% of his support and he could not be claimed on the tax return of anyone else if he had a 1099 for that year, this would probably disallow claiming him as a dependent the brother cannot force the payment of taxes, IRS can tho
2010-12-02 12:07:26
Bash Limpbutt's Oozing Cyst?:  If your husband didn't report the income that his brother paid him, he screwed up royally. The fact that he didn't receive a 1099 from his brother is irrelevant. He's required by law to keep accurate business records and use those records to prepare his own returns. If he had, the fact that his brother would be forced to issue 1099s up to 10 years late would be a non-issue for your husband. You have another problem as well. If your now husband had more than $3,650 in GROSS income in 2009 (assuming that that's the year that you claimed him as your dependent before you were married), YOU must amend your return(s) and drop the dependency claim. I emphasized the word "gross" above as this applies to self-employment income BEFORE any business expense deductions. In theory he could have lost money but if his gross receipts were more than the personal exemption amount for the year in question -- $3,650 for 2009, $3,500 for 2008 -- you cannot claim him as your dependent regardless of how much of his support that you provided.
2010-12-02 12:30:41
SmartA$$:  Your husband will have no choice but to go back and file late returns for all the years that he receives a 1099. Your husband was required to report his self employment income on schedule C and pay all appropriate self employment taxes and regular income taxes on his net profits even if he didn't receive a 1099. Self employed individuals are required to keep their own records and report everything even if they are not given any 1099 forms. You will probably have to amend all the returns on which you claimed him as a dependent because now his gross income will be too high for him to qualify as your dependent. That will mean you have to repay a portion of your refunds. On top of all the taxes owed, you guys will have a huge bill for penalties and interest. I suggest you cooperate with the IRS and set up a payment plan because what you described is tax fraud and could land your husband in jail if the IRS pressed charges. They are unlikely to press fraud charges if he cooperates and pays what he owes.
2010-12-02 12:31:41
Judy:  The brother can't force him to pay - but the IRS can, and will. OK, so he's been illegally evading taxes for all these years, and now he's caught. What did he expect? His brother will give him a 1099 - and no, doesn't sound like his brother was an employer, they were contractors together. And income is income whether or not he got a W-2 or 1099 for it, and he was legally required to report it. If his total income for 2009 was $3650 or more, you'll have to amend YOUR return also and drop him as a dependent.
2010-12-02 12:49:03