filing taxes?

Question

my boyfriend works under the table. two weeks ago he went and signed on a loan for a car. the loan was granted because he provided a letter of employment stating how much he earns. will the IRS find out about this and should he file taxes this year to avoid any potential problems that may arise due to this new car loan? ( he doesnt make a heck of alot of money, just enough to cover the bills, but we needed a car desperately)

Answer 1

To answer your question, No the IRS won't find out because the letter went to the lender, who is trying to make his own living. He is not going to forward it to the IRS. There is no MISC-1099 to be mailed to him on a car loan.

Answer 2

The number one reason the IRS will find out will be the 1099-Misc issued in your boyfriend's name at the end of the "year."

Eventually the employer will get audited. He'll be told that the can't take a deduction for labor unless he has reported the income to the IRS. When he sees how much money he will owe, he'll have his accounant issue 1099-Misc forms (he never withheld for FICA/MC so he won't want to do W-2 forms). Then, when the IRS gets the forms, they will match them to your boyfriend's tax return...which won't show the income. Since your boyfriend was so supposed to report all income--whether or not the IRS got a report!--he'll get a huge bill. Adding in penalties and interest, subtracting out any erroneously received EIC...the bill doubles.

Second likely reason--if only your boyfriend is audited, he's spending above his stated income. The IRS has statistics on what things cost and they'll just add up his rent, his food, the car payments, etc and ask him *how* he is paying for it. Again, if it's not on his tax return, he's got problems...and the IRS can call it fraud in which case there's no statute of limitations. (No statute means the IRS can come back at any time in the future and demand the money.) Plus, once one employee gets audited, the employer gets audited and then every other employee gets audited....

Answer 3

Working under the table can create a host of problems outside the realm of plain dishonesty.

1. If the table falls on him, he will not be covered by workers compensation insurance. Does he have the money to pay his medical bills then?
2. He may also have trouble collecting unemployment if he loses his job.
3. Social Security is not going to go away. For him, it just won't come on the earnings he has now.
4. For people at the bottom of the wage scale, the tax bite is pretty small.
5. For you, when all this nonsense finally hits the fan, if you are with him, it will hit you too.

Answer 4

Your "boyfriend" is surfing in dangerous waters. Eventually the IRS catches most tax cheats. And that's exactly what he is -- a cheat. It's always better on the cheat to come clean with the IRS and pay their debts. Once the IRS comes looking for you the gloves come off and it will only cost you more in the long run.

Personally, I'd lose this loser. He has shown his true character by cheating on his taxes. The probability that he will shirk other responsibilities is therefore great. You don't need this type of cheat in your life. In the end it's your life, but I wouldn't go there myself.