Favoritism because of son.

[jtgoldny]

Connecticut:19 year Co-worker is controllers son. He arrives 1hr to 1.5 hrs late every day. Noticed he is not punching out when 4pm arrives and goes to his mother before leaving. I suspect his mother is changing his punch in and punch outs so he doesn't fall short of the 40hrs he is scheduled. He has the same schedule as me and does not work other days I'm off. I'm 34 years old working there for almost 10 years. It is unfair that he is able to come in when he wants and still gets paid for 40hrs.

 

[Proserpina]

Connecticut:19 year Co-worker is controllers son. He arrives 1hr to 1.5 hrs late every day. Noticed he is not punching out when 4pm arrives and goes to his mother before leaving. I suspect his mother is changing his punch in and punch outs so he doesn't fall short of the 40hrs he is scheduled. He has the same schedule as me and does not work other days I'm off. I'm 34 years old working there for almost 10 years. It is unfair that he is able to come in when he wants and still gets paid for 40hrs.

Not fair, perhaps, but not illegal.

 

[OHRoadwarrior]

As long as the company owners feel so, yes. Decades ago, I worked for a smaller family owned company. My foreman, who had gotten me the job went on vacation, leaving no one specifically in charge of the dept. I discovered a large batch of poorly molded material that would not hold the screws assembling it. I went the doofus in the department who was related to the family and had self appointed himself supervisor in absentia, explained the issue and how much it would cost the company if we did not stop the presses(no pun intended) and sort the bad metal out. His response, being a doofus was to raise a piece of cut stock over his head in a manner threatening to hit me with it and said not to worry about it, just use the stuff. With the rest of the dept, now stopped and watching, I politely looked at him and advised him if he ever threatened me again with a piece of cut stock, I was going to shove it where the sun didn't shine. I was fired that day after he went running to office crying. We used the defective material that day. Within 2 years the company went under. I assume it was from the liability of all the production units that had been purchased and installed at a cost of about $100 each and replacement cost to reinstall a replacement of about $250 per unit by the customer after they all fell apart. The point being, you have no say over the decisions made by those senior to you.

 

[cbg]

Bottom line: If the employer is willing to allow this to go on, there is no law that will force them to change things. Fair is where you go to eat cotton candy and ride the Ferris wheel.

 

[commentator]

I've seen companies where they didn't even have to report to work at all, not even an issue that they were an hour or so late, they just plain old didn't show up, didn't contribute, didn't do a thing, and still got that salary. It's legal. Fair, not especially. Legal, yep.

 

[LdiJ]

I've seen companies where they didn't even have to report to work at all, not even an issue that they were an hour or so late, they just plain old didn't show up, didn't contribute, didn't do a thing, and still got that salary. It's legal. Fair, not especially. Legal, yep.

Actually its not "legal". Its called ghost employment and it is a direct violation of the federal tax code...the not showing up at all part anyway. I agree that someone could be paid a salary and not have to adhere to a set schedule as long as the work they perform justifies the salary, but ghost employment is seriously illegal under the tax code.

 

[Zigner]

Actually its not "legal". Its called ghost employment and it is a direct violation of the federal tax code...the not showing up at all part anyway. I agree that someone could be paid a salary and not have to adhere to a set schedule as long as the work they perform justifies the salary, but ghost employment is seriously illegal under the tax code.

Not being snarky -

Can you elaborate? So long as all taxes, etc are paid, then what is the problem? A "ghost employee" is one that does work but is paid off the books (or so I thought).

 

[LdiJ]

Not being snarky -

Can you elaborate? So long as all taxes, etc are paid, then what is the problem? A "ghost employee" is one that does work but is paid off the books (or so I thought).

No, someone being paid off the books is not ghost employment. Its equally illegal but its not ghost employment.

A business gets a tax deduction for salaries/wages paid. Therefore the taxable income of the business is directly reduced by the salaries/wages paid.

Let me give you an example of ghost employment.

Mr X has an S-corp and hires employees. He also has a deadbeat 20 year old son who costs him money. He decides to put deadbeat son on the payroll for 50k a year even though son does nothing. Yeah, he is going to spend some money on payroll taxes, insurance and all of that, but all of that is going to be deductible to the business so its going to reduce HIS taxable income. Yeah, son is going to pay taxes on that income but dad is going to withhold those taxes from the 50k, so essentially dad is going to give son somewhere around 35k that nobody is going to pay taxes on.

That is a whole lot cheaper for dad than simply giving deadbeat son 35k in after tax income.

I fired a tax client once because he had three minor children and put all three of them on the payroll (its actually legal for minor children, even really young ones to receive a salary for working in their parent's business). However, his children were NOT working. He just put them on the payroll. So, he got to deduct their salaries from HIS income, but since their, on paper wages were less than the level required for them to pay taxes, their salaries just ended up being tax free income.

I hope that makes sense to you. Its a bit complicated and difficult to explain to a layman.

 

[xylene]

Mr X has an S-corp and hires employees. He also has a deadbeat 20 year old son who costs him money. He decides to put deadbeat son on the payroll for 50k a year even though son does nothing. .

Ok, that makes total sense in a no-show job situation, but the functional question is to define nothing when the son-worker is showing up. Or the threshold of nothing.

In the OP's scenario the son is shorting the hours about 19% by time card fraud.

What if the filiial employee was just doing a half assed job? Or punching the card and being utterly incompetent? Does the tax law require employee competency?

 

[Zigner]

No, someone being paid off the books is not ghost employment. Its equally illegal but its not ghost employment.

A business gets a tax deduction for salaries/wages paid. Therefore the taxable income of the business is directly reduced by the salaries/wages paid.

Let me give you an example of ghost employment.

Mr X has an S-corp and hires employees. He also has a deadbeat 20 year old son who costs him money. He decides to put deadbeat son on the payroll for 50k a year even though son does nothing. Yeah, he is going to spend some money on payroll taxes, insurance and all of that, but all of that is going to be deductible to the business so its going to reduce HIS taxable income. Yeah, son is going to pay taxes on that income but dad is going to withhold those taxes from the 50k, so essentially dad is going to give son somewhere around 35k that nobody is going to pay taxes on.

That is a whole lot cheaper for dad than simply giving deadbeat son 35k in after tax income.

I fired a tax client once because he had three minor children and put all three of them on the payroll (its actually legal for minor children, even really young ones to receive a salary for working in their parent's business). However, his children were NOT working. He just put them on the payroll. So, he got to deduct their salaries from HIS income, but since their, on paper wages were less than the level required for them to pay taxes, their salaries just ended up being tax free income.

I hope that makes sense to you. Its a bit complicated and difficult to explain to a layman.

I guess I'm still looking for the law that says it's illegal to pay an employee that doesn't physically work for you. The fact is that the son IS paying taxes on that money (thru withholdings.) I'm not talking about minor children...

 

[LdiJ]

I guess I'm still looking for the law that says it's illegal to pay an employee that doesn't physically work for you. The fact is that the son IS paying taxes on that money (thru withholdings.) I'm not talking about minor children...

That was an example...

I do not know how to explain it to you to make you understand why its illegal. Obviously you did not understand my previous examples. Bottom line, ghost employment reduces the taxable income of the business/business owner. It allows the business owner to change non-deductible, personal expenses into deductible, business expenses. Yes, the person receiving the money may pay taxes on it (or may not depending on their tax attributes) but it will be at a lower rate than the business/business owner. This is illegal.

In most states, some forms of ghost employment are actually felonies. Do some googling if you want confirmation of what I am saying.

 

[LdiJ]

Ok, that makes total sense in a no-show job situation, but the functional question is to define nothing when the son-worker is showing up. Or the threshold of nothing.

In the OP's scenario the son is shorting the hours about 19% by time card fraud.

What if the filiial employee was just doing a half assed job? Or punching the card and being utterly incompetent? Does the tax law require employee competency?

I wasn't addressing that particular issue. I was responding to Commentator's remark that it was legal to pay someone a salary who did not work at all. However, it is potentially illegal for someone to be paid who is incompetent or who is only doing a half assed job.

Example:

Boyfriend and Girlfriend live together, unwed, and have 2 children. BF has a construction business and the profits result in income that is in the 25% tax bracket. GF stays home with the children. BF "employs" the GF for 15k a year, to be his receptionist, but she actually answers the phone maybe once a day or once every other day. That allows him to save 25% in taxes on her salary, 25% in taxes on the health insurance that he provides to her, and allows her to not only not pay tax on the income, (because her standard deduction and personal exemptions zero it out) but to receive about 7k in tax refunds due to EIC and Additional Child Tax Credit, and allows her to earn Social Security credits that she would otherwise not earn. That is both tax fraud and Social Security fraud.

 

[cbg]

None of which is applicable to the OP's question, since it does not appear that the son is not working at all - just not to the OP's satisfaction.

 

[commentator]

Point taken and accepted that with the grown kids who never showed up at all they employers were in violation of tax and ss codes, but is there any standard in the regs that determines what is an acceptable level of performance to make you a legitimate employee? Something about how many hours a week the wife in your scenario would have to actually perform receptionist duties to make her a legally acceptable receptionist? Just curious, not really related to original issue, except that son being there and not yet being late and doing much of a job is legal, right? Is that related to hours actually spent on site? Its interesting to me to find out that these small family businesses I know of that have done this for years are actually doing something illegal as well as generally sleazy. They're very preachy responsible job creators!

 

[cbg]

The OP's complaint is that it's "not fair" that an executive's son should be able to come and go more or less as he pleases.

The OP would not necessarily know if the OP's son is working on special projects or working from home or running errands for Mom. He does not *know* that punches are being changed; he only suspects. And unless he works in Payroll or the son is showing the OP his paycheck, he also does not *know* what the son is getting paid for. Nor is it any of his business.

Legally, based on the facts we have, this is a non-issue.