Hello, I have a barber working in my shop as an independent contractor, he has worked here for 3 years. He is about to go to court regarding child support, however, he recently informed me that he has not paid taxes in the 3 years that he's worked in my shop.
As an independent contractor he is obligated to handle his own taxes by himself or by a CPA, he also is supposed to turn in a 1099 MISC form for me to fill out for him.
I the, owner am only obligated to take the rent and fill out 1099 forms (if given) to me by the indepedent contractor. It is not my obligation to give out 1099's. I pay monthly city taxes on each rental station per month, otherwise the rent is pays the bills and returns a small income.
Anyways, I feel that I could receive trouble from state and IRS agents in the months and years to come because of this,
How are they going to determine his income without investigating my shop, etc....
Thanks in advance....
2006-10-26 18:26:06 · 4 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
you are correct.
But the IRS will be easy on you if you are forthcoming with them.
My best advice to you would be GET A LAWYER!!! It is never a good idea to deal with the government without a lawyer.
Good luck.
2006-10-26 18:31:25 · answer #1 · answered by USMCstingray 7 · 2⤊ 1⤋
If you you have a written agreement that indicates that you are only renting him space from which he conducts "his barber business" you are not obligated to supply him a 1099. Under those circumstances he should be collecting his own fees for services (haircuts), using his own equipment other than a chair that you are renting him and setting his own hours. You could have some conditions in the rental agreement concerning his operation but the daily supervision of his performance should not be at your direction.
The less that all of the above is true the more you are moving toward the independent contractor relationship in which you would be required to provide a 1099. If that is the case you must complete the form 1099 Misc, sending a him and the IRS a copy by 01/31 each year. he is under no obligation to provide the form. If you are required to have completed a 1099 Misc for him and you have not you could be fined by the IRS and your state if they have income tax.
The secret to avoiding all of this is the written agreement that you must have between you and all of those that you rent space to.
2006-10-27 02:01:23 · answer #2 · answered by ? 6 · 0⤊ 0⤋
If you have a shop, and this barber is paying you rent and collecting his own income and you never touch that income, then you are NOT responsible for issuing him a 1099. He is a renter of space, not your contractor. In fact, even if he asks you for one and tells you what to put on it, you definitely shouldn't. Why? You have no proof what he says to put down is true. Since you have no fiscal accountability for his income, definitely do NOT fill out the 1099. People can (and should) report worldwide income on their 1040 each year REGARDLESS whether they receive 1099s or W-2s. A dentist who rents office space doesn't get a 1099 from anyone yet they fill out their tax return each year. The same goes for the barber renting out your space.
Now, if you collect money from his customers and pay him a cut, then he is essentially a contractor. You do owe him a 1099. You know how much he made and you gave it to him. In fact, he could actually be an employee and you would owe him a W-2. If you set his hours, tell him how to work, ask him to do other things than cut hair, then he may be your employee.
2006-10-27 08:31:05 · answer #3 · answered by TaxMan 5 · 0⤊ 1⤋
do you have a lease/rental agreement in writing during all time this man has rented from you?
2006-10-27 01:35:16 · answer #4 · answered by illinois_girl_1973 3 · 0⤊ 0⤋