My Co-worker does not pay tax?

Question

The part time cleaning lady on my job gets paid on a consultant line. No taxes are taken out on her. Last year was her first entire year working - she only made $10,400 for the year and did not file taxes. She said that she doesn't want to pay money to the IRS. I am really

concerned for her. Can she get in big trouble for this?

Answer 1

Depends on how many dependents she has, at 10,400 dollars she would only need another deduction besides herself to not pay any tax, with the standard deduction and two dependents she would have zero tax but.... she does have to pay SS tax and the IRS will come after her for it sooner or later if she is not paying it.

Answer 2

If she has any dependents, she would owe no tax and might get an earned income credit if she filed.  She might need to get a CPA to prepare her return if she is unable to do it herself.

Answer 3

The payer will send a copy of the 1099-Misc to the IRS.

The IRS will (some time after October) send her a letter asking for her tax return.  (Even if she doesn't owe any income tax, she owes $1469 in self-employment tax.)  By not having an extension and filing late, she'll quickly owe another $500 in penalties and interest.

If she ignores that letter, the IRS will contact the payers and tell them that since she hasn't filed to send them 28% of any future payments.  The IRS will also file for her.  They will assume she is single with no dependents.  Even if this is her only income and she was eligible for, say the earned income credit, they wouldn't automatically give it to her.

PS, unless and until she files, she will not have a credit with the SSA towards retirement benefits.

Answer 4

Erica:

What she does with her money, her tax status and whether or not she files is her own choice. She may have other circumstances that do not require her to file, that you are not aware of.

People who don't have a valid social security number or alien registration number are at risk for discovery if they file. So are people who use a fake social security number.  

Independent contractors are responsible for their own taxes. If an employer is paying someone on that basis, their information gets reported to the IRS anyway, if the employer is legit and doing things right.  If not, the IRS would have a hard time tracking them anyway.

If she's concerned about this, then she should consult an accountant or tax attorney about the ramifications of not filing.