my friend is building a house and paying his illegal workers in cash. he is then deducting that cash paid to illegal immigrants from his bottom line on his taxes. i told him this was illegal...is it?
2007-12-19 01:44:41 · 4 answers · asked by jolly 1 in Business & Finance ➔ Taxes ➔ United States
he is building a house for himself.
2007-12-20 06:08:37 · update #1
Your question does not specify if he is building a house for himself or whether he is building the home as a contractor for someone else.
If he is a contractor, your friend is violating the law by hiring illegals. If he is building the home for himself, he is not permitted to deduct the payments as it is a personal expense.
2007-12-19 05:31:40 · answer #1 · answered by taxreff 7 · 1⤊ 0⤋
The deduction is not illegal, it is an expense (Even drug dealers can deduct expenses - cost of goods sold).
However if he pays illegal workers from a corporate or business account he could be in some hot water for payroll tax evasion. If the house is for him (he's not selling it or contracted to build it) then he is probably safe from the IRS. By federal law he should issue them a 1099 for any worker recieving more than $600.00.
My guess... His worst problem is Workman's comp. if they get hurt... Not the irs.
2007-12-19 09:59:13 · answer #2 · answered by Brewer 2 · 0⤊ 1⤋
At some point, he will be audited. Since he won't be able to show that he made a legal deduction, the money will be added back to his income.
By the time the IRS catches him, he will owe double the amount of tax in the form of penalties and interest.
2007-12-19 10:56:10 · answer #3 · answered by Anonymous · 1⤊ 0⤋
Paying workers in cash is legal provided proper taxes are withheld. Using illegal workers is, obviously, illegal.
2007-12-19 10:26:06 · answer #4 · answered by Anonymous · 1⤊ 0⤋