In the article titled, “IRS to Pay Back-refunds to Illegal Immigrants Who Didn’t Pay Taxes” by The Washington Times, raised a red flag to me. As a CPA, I try to look out for my clients so that they do not get in any trouble, but the quote below opened my mind to a problem that is coming.
The article stated, “Under the new program, if you get a Social Security number and you work, you’ll be eligible to apply for the Earned Income Tax Credit,” Mr. Koskinen said.
He said that would apply even “if you did not file” taxes, as long as the illegal immigrant could “demonstrate having worked off-the-books during those years.”
This might make you mad that the illegals get a refund. However, read the statement, “…could demonstrate having worked off-the-books…” If the illegals show they worked off the books, the full wrath of the IRS will be coming upon the businesses or people who paid the illegals and did NOT withhold or match payroll taxes.
The amnesty is to the illegals not the businesses that paid them. The “Trust Fund Penalty” for not paying Social Security Tax and Medicare Tax is severe. The employer will be responsible for the employer and employee portions of the tax and penalties equal to 100% of the tax. If we do the math, let’s say you had a person, illegal, being paid $500 per week and he worked for 50 weeks. That would make his pay $25,000 per year. The tax you would have paid, if you had paid him legally, would have been ($25,000 * 7.65%) or $1,912.50. Now you will pay your portion, his portion and a penalty equal to both portions or $7,650.00 (1,912.50 (your tax) + 1,912.50 (their tax) + 3,825.00 (penalty)). Remember the statement at the bottom of your tax return, where you sign it; it starts out “Under penalty of perjury…” By signing your personal and/or business tax forms, if you paid illegal workers off-the-books, you also have committed perjury. Also, if the tax owed is substantial, you have committed FRAUD. FRAUD=Jail!
Be careful; the amnesty program is another program to go after businesses that did not withhold and pay what was legally required of them. If you have paid illegal people off-the-books, consult with a tax attorney, CPA, or other competent financial consultant.
There is one more problem; if the bookkeeper paid the EFTPS (federal withholding, Social Security Tax, and Medicare Tax) online and knows you were paying people off-the-books, the IRS will come after that person if the business did not pay the taxes and the owner is unable to pay the taxes. If the bookkeeper knows more secrets about you, you had better watch out! They can cut a deal. The IRS will chain your doors and run you out of business. I have seen it done.
Please understand; I am a CPA. If I were a plumber, I am conservative enough to wear suspenders and a belt. I am not trying to cause anxiety in anyone, but I am reading between the lines. We all have a responsibility to pay to Caesar what is Caesar’s and to pay to God what is His. My job is to keep you legally from paying any more than you have to. Paying people off-the-books is trouble brewing.
Respectfully, – JEH