Getting paid in cash, taxes, and welfare?

If they're both being paid in cash, then you can be sure that they are getting paid "under the table" and aren't reporting that income to anyone. That's why they can be on welfare.

No, he's not. Figure that your tax bill will be between 30% and 45% of whatever he's paying you. Unless he's making a VERY generous offer, he's NOT doing you any favors at all. BTW, when you cash the check you'll have to endorse it. This will leave an audit trail that will burn BOTH of you if you don't play by the rules.

Sounds like they are collecting welfare illegally, if they aren't reporting their income to the welfare office. And there's no way a family of 4 making around $50K is eligible for welfare.

If and when they get caught, and they probably will, they will be in major trouble with both the IRS and the welfare office - and will be required to pay their back taxes, plus pay back the welfare payments that they essentially stole from the welfare system by lying to them about their income.

Tax Evasion and Welfare Fraud are both felonies. Both your cousin & spouse could easily be convicted if the government knew what they were doing. Maybe the 17 year old will turn 18 in time to care for the 9 year old when they both get sent to prison.

Your cousin is doing the housekeeper a diservice by not withholding/paying unemployment, social security, etc. If the housekeeper needs to file for unemployment or gets hurt she can't prove she had been working.

The cleaning lady/housekeeper and her husband are both receiving cash wages and welfare payments?

Of course they are not reporting any taxes. Nor are they reporting their income to the welfare system. $4K a month is a substantial income far above the limit to receive welfare payments or food stamps.

If your cousin has a regular cleaning lady/housekeeper as you describe, the housekeeper is an employee of your cousin. Your cousin needs to issue the housekeeper a W-2 and deal with the payroll taxes (there are a couple ways to do this). If this couple ever tells the IRS that your cousin didn't pay payroll taxes or withhold federal income taxes, your cousin will be in trouble.

When the couple gets caught, your cousin will have some taxes and fines to pay. Your cousin should re-think her choice of domestic help.

People who are paid in cash often choose not to report on the income taxes. They are, of course, breaking the law, and should be reported to the State authorities for violation of welfare laws, and IRS for violation of the tax laws.

However, if your cousin is not filing and paying the Social Security tax on her in-home employee, she is also breaking the law. Some day, when this couple wants to collect social security, they won't be able to. In addition, the IRS could attempt to collect fines and penalties from your cousin for her failure to obey the law.

Start with organization that gives free or go to tax preparer in your state that can give you what should be reported according th the tax code in that state.

Is your cousin withholding taxes from what she pays this lady, and remitting that money to the federal and state government? Does your cousin give this lady a form W-2 each year and sends a copy to the IRS and state government? I suggest to show IRS Publication 926 to your cousin (http://www.irs.gov/pub/irs-pdf/p926.pdf).

Sounds like welfare fraud to me. And probably tax fraud.

We are an Accounting Firm. Http://www.bcbsinc.com

We will state right off the top to many of the posters. You assume far too much. Courts, laws, rules, etc. will determine if they are felonies. Not frivolous remarks. Some may be felonies but this is black and white. Not all cases, not all circumstances are black and white. Not all cash payments are illegal under the table payments. Read the following and you will know why you should not assume when it comes to the law, some of the posters, before you make such statements. This merely one example.

According to the following as stated by revenue -

We hired a nanny to look after our baby while we work. How do we pay her social security taxes and properly report her income?

A nanny is considered a household employee. A household employer only has to pay social security and Medicare tax only for the employee(s) that receive cash wages that exceed the threshold amount for the year. If the amount paid is less than the threshold, no social security or Medicare tax is owed. If social security and Medicare tax must be paid, you will need to file Form 1040, Schedule H (PDF), Household Employment Taxes. You must withhold the employee's portion of the social security and Medicare unless the employer chooses to pay both the employee's share and the employer's share.

Source: http://www.irs.gov/faqs/faq12-6.html

In such case your cousin is considered a household employer. Is the threshold met. Your cousin should refer to the source listed. If the threshhold which is spoken of is met etc. whatever the case the tax may have to be paid out, the tax may not have to be paid out. Never assume people, it is always tax evasion just cause people receive cash payments. The rules are complex, no situation is ever the same. Not yours, not mine, not this person's cousin.

The rest are basically "under-the-table" payments the contractor is seeming to make. Then again, this may not be so as well. Do they consider it contractual labor and otherwise. Do they meet the prongs for doing so. I will not assume they wont'. Will the IRS assume they do or not. We are not revenue. Revenue is an animal all to themselves. Ask revenue.

As for Welfare fraud and otherwise, it may very well be so as I was under like impression one must claim all income; then again I cannot say so again as I do not know the entire matter or the type of governmental assistance.

All situations are not the same, all tax situations are different and may not apply to all. Welfare has rules and if you violate those rules you get penalized. The same way for revenue.

What does Welfare require, depends on their particular rules for that type of welfare benefits. http://www.ssa.gov/ is for SSI and SSA, Title II and Title XVI benefits, and old age and survivors, etc. As for other types, state based, or other governmental forms, we do not know which state or city you may live or who is proving the welfare or otherwise. So we will not provide links or state it is probably fraud as some may think.

Best to ask the agency themselves. It is their rules and they will tell you what their rules are about, what you must do to remain qualified under their rules, what you may not do under their rules, and what you will "have to do," should you get in trouble for violating their rules. It is their rules that will determine if fraud has occurred and their rules that the courts may use if they pursue that fraud. Not the supposed statements of the posters. Every agency has rules, every agency and situation is different. Could it be wrong, perhaps, could it be right, perhaps. Is anyone, cousin, contractor etc. violating the laws, etc. maybe so, maybe no. Never assume. Dr. Einstein stated the most complex thing is the income taxes. Believe this is true. The same goes for state and govenmental based systems. They are very very complex and nothing is ever as black and white as it may seem.

Good luck.

Wayne Barney

President

BC Business Services, Inc.