Wife's Boss Tax Evading??

[arcaneview]

What is the name of your state (only U.S. law)? Michigan

My wife works for a small business here in Michigan. The small business is owned by two brothers who work in her office. The older brother has a larger share in the company than his younger because he was the founder 20 years ago. My wife is I guess you'd call her the controller of the company because she does the payroll, the 401k, the accounts payable, and accounts receivable.

The older brother (further called owner in this post) owed a lot of personal taxes last year and has been scheming up a way to make sure his spoiled wife doesn't get him into crazy debt tax time again so he's allowed her to receive her own company credit card. My wife was skeptical about doing it because she knew why he was doing it but because she didn't want to lose her job she did it.

Well when the bills were coming in that she spend $12k in one month, the owner said to put the bills under as an expense. My wife fought this and did this as an executive loan instead without telling him. At some point he found out and now he wants his wife to be on the payroll (with taxes being withheld obviously) making enough money to pay off the company credit card. My wife has an issue with this because she'd be a ghost employee (not really working there).

Knowing what you know about the situation, is what the owner is trying to do illegal or common shenanigans for small business owners? Will my wife get in trouble if she does as she's told and puts her on the payroll because she doesn't want to get involved if she's committing a crime.

My wife and I look at it this way, he's trying to rob a bank but he's not doing it himself, he's having my wife hire a crew of thieves rob it so he can get the job done but we think EVERYONE involved is punishable by law and we don't want anything to do with it...

We were thinking about turning the company over to the IRS but we really need my wife's income because of this new economy...

HELP!!!!What is the name of your state (only U.S. law)?

 

[irsos]

What is the name of your state (only U.S. law)? Michigan

My wife works for a small business here in Michigan. The small business is owned by two brothers who work in her office. The older brother has a larger share in the company than his younger because he was the founder 20 years ago. My wife is I guess you'd call her the controller of the company because she does the payroll, the 401k, the accounts payable, and accounts receivable.

The older brother (further called owner in this post) owed a lot of personal taxes last year and has been scheming up a way to make sure his spoiled wife doesn't get him into crazy debt tax time again so he's allowed her to receive her own company credit card. My wife was skeptical about doing it because she knew why he was doing it but because she didn't want to lose her job she did it.

Well when the bills were coming in that she spend $12k in one month, the owner said to put the bills under as an expense. My wife fought this and did this as an executive loan instead without telling him. At some point he found out and now he wants his wife to be on the payroll (with taxes being withheld obviously) making enough money to pay off the company credit card. My wife has an issue with this because she'd be a ghost employee (not really working there).

Knowing what you know about the situation, is what the owner is trying to do illegal or common shenanigans for small business owners? Will my wife get in trouble if she does as she's told and puts her on the payroll because she doesn't want to get involved if she's committing a crime.

My wife and I look at it this way, he's trying to rob a bank but he's not doing it himself, he's having my wife hire a crew of thieves rob it so he can get the job done but we think EVERYONE involved is punishable by law and we don't want anything to do with it...

We were thinking about turning the company over to the IRS but we really need my wife's income because of this new economy...

HELP!!!!What is the name of your state (only U.S. law)?

Assuming the wife's salary is really being used to pay back the credit cards, the IRS is not out any money. In fact, it could be argued that they are ahead in the sense that she may be paying FICA tax on money that may not be taxed if it were paid to her husband directly. This assumes he is over the FICA limit.

It may be that the younger brother is the only one being hurt since the older brother may be taking out more than his share of the profit. If the younger brother is happy with that - it is none of your business.

Had the previous situation continued with the company paying her creidt cards and expensing it, then there would be an issue of tax fraud. But as you describe it currently, there is none.

BTW, your wife's job is probably hanging by a thread.

 

[davew128]

BTW, your wife's job is probably hanging by a thread.

And her updating her resume and approaching other possible employers would be wise even if it wasn't. I have seen bookkeepers/controllers worth their salt in the past resign rather than be a party to something that was wrong. Whereas I have seen many a CPA look the other way with clearly wrong positions on tax returns on an engagement because of the fee the client was paying. So much for impartiality.

I'll also point out that theoretically, it's possible under audit that the business deduction for the wages are disallowed while the wage income is still kept so there is a risk there.

 

[irsos]

And her updating her resume and approaching other possible employers would be wise even if it wasn't. I have seen bookkeepers/controllers worth their salt in the past resign rather than be a party to something that was wrong. Whereas I have seen many a CPA look the other way with clearly wrong positions on tax returns on an engagement because of the fee the client was paying. So much for impartiality.

I'll also point out that theoretically, it's possible under audit that the business deduction for the wages are disallowed while the wage income is still kept so there is a risk there.

I doubt your statement that you have seen "many a CPA look the other way..." I am not saying it does not happen but it is not so widespread than one non-CPA is likely to see a lot of it. It could be that you simply disagree with the position of the CPA - and you may be wrong. CPA's are not "impartial" with regard to tax returns. They are clearly advocates for their clients. When an issue can go either way, it is proper for them to take the position that is favorable to the client as long as there is a reasonable basis for it.

Very few tax return preparation fees are so large that a CPA would be tempted to intentionally break the law for a client. It is also a fact that some clients lie and you are almost always told only one side of the story.

Finally, it is not appropriate to disparage an entire class of tax professionals in this forum.

 

[davew128]

I doubt your statement that you have seen "many a CPA look the other way..." I am not saying it does not happen but it is not so widespread than one non-CPA is likely to see a lot of it. It could be that you simply disagree with the position of the CPA - and you may be wrong. CPA's are not "impartial" with regard to tax returns. They are clearly advocates for their clients. When an issue can go either way, it is proper for them to take the position that is favorable to the client as long as there is a reasonable basis for it.

I HAVE read Circular 230......

Very few tax return preparation fees are so large that a CPA would be tempted to intentionally break the law for a client. It is also a fact that some clients lie and you are almost always told only one side of the story.

It is also a fact I am speaking from first hand observation.

Finally, it is not appropriate to disparage an entire class of tax professionals in this forum.

I really didn't ask for your unsolicited and off target opinion.

 

[Zigner]

I HAVE read Circular 230......

It is also a fact I am speaking from first hand observation.

I really didn't ask for your unsolicited and off target opinion.

The problem is that you have chosen to insult an entire group of people based on your tiny sampling...

 

[davew128]

The problem is that you have chosen to insult an entire group of people based on your tiny sampling...

Said "tiny sampling" including CPA firms large and small on both coasts......

 

[Zigner]

Said "tiny sampling" including CPA firms large and small on both coasts......

http://tinyurl.com/yeoq6lk

 

[davew128]

http://tinyurl.com/yeoq6lk

http://fast1.onesite.com/fans.wwe.com/user/firestarter756/4707ca1996b16741bbb71f6d497f26c5.jpg

 

[Zigner]

http://fast1.onesite.com/fans.wwe.com/user/firestarter756/4707ca1996b16741bbb71f6d497f26c5.jpg

You are the one here making the bs claims.

 

[davew128]

You are the one here making the bs claims.

Really. And this is based on your lengthy experience working with and for CPA firms. I'll be sure to relay your opinion to the attendees in my next preparer penalties seminar.

Since you're convinced I'm full of it anyway, tell me, what IS your opinion of a CPA who prepares a corporate return based off of an audited financial statement they prepared themselves and deducts $1 mil of travel and entertainment expenses at casinos?

Hypothetically speaking of course, because we wouldn't want to classify an entire group.

 

[irsos]

Really. And this is based on your lengthy experience working with and for CPA firms. I'll be sure to relay your opinion to the attendees in my next preparer penalties seminar.

Since you're convinced I'm full of it anyway, tell me, what IS your opinion of a CPA who prepares a corporate return based off of an audited financial statement they prepared themselves and deducts $1 mil of travel and entertainment expenses at casinos?

Hypothetically speaking of course, because we wouldn't want to classify an entire group.

My opinion is that there is not enough information provided to reach any conclusion.

 

[Zigner]

Really. And this is based on your lengthy experience working with and for CPA firms. I'll be sure to relay your opinion to the attendees in my next preparer penalties seminar.

Since you're convinced I'm full of it anyway, tell me, what IS your opinion of a CPA who prepares a corporate return based off of an audited financial statement they prepared themselves and deducts $1 mil of travel and entertainment expenses at casinos?

Hypothetically speaking of course, because we wouldn't want to classify an entire group.

Assuming something improper occurred in your hypothetical...

That's 1 down - hundreds of thousands to go!

 

[davew128]

Assuming something improper occurred in your hypothetical...

That's 1 down - hundreds of thousands to go!

Remind me again of your vast experience in public accounting.....

 

[Zigner]

Remind me again of your vast experience in public accounting.....

I would never presume to state something defamatory about a huge group of people based on an infinitesimally small cross section (as you have done)