One heck of a TAX mess.......?

Question

Hello,

I worked for a company in 2001 doing data entry for 15 dollars per hour. That company gave me a w-2 at the end of the year with what i made from my hourly wages. The owner of this company also had a company set up on the side from which he was giving us lavish gifts. All in all with these gifts I made close to 115K for that year. I worked for the data entry company for 5 years after that and never made over 35k and never recieved any more checks from his shell company. My question is do I owe the taxes on the gifts if his other company never gave me a 1099 or W-2. Stupidly I filed taxes that year saying I made the 116K, Can I claim this was a mistake citing my W-2s from those years and refile? I have a tax lien on my credit report for 14K and cant get a loan for a house let alone an automobile. Any advice would be greatly appreciated.

Answer 1

The issue can be viewed legally or morally.  What was the REAL true iintention?  

Be prepared.

Answer 2

I have a different opinion...  since you rec'd a w-2, it sounds like the other payments were not linked to a service you provided your employer.  In this case, it would be considereed a gift.  This would not be taxable income to you.  However, if it was over 12,000 your freind would need to file a gift tax return.

Answer 3

You could file an amended return (1040X). But there are a few questions.

Why were you and others given lavish gifts? It makes no sense. Why no 1099? (are you sure he didn't file a 1099 with the IRS?)

If you received the gifts and money, you owe the taxes. To get out of this, you are attesting, under penalty of perjury, that you didn't receive these gifts.

In the IRS world, 14K isn't considered a large amount. You can get into a payment plan by calling your contact number, or even online at IRS.gov. That won't lift the lien, but once the tax is paid off, the lien is released.

Or, you can file Form 911 (that number is intentional) if you are in dire straights. These people have broad authority.

Answer 4

The IRS is going to contend that these were NOT gifts.  The IRS will say they were disguised compensation.  

1.  You did work for the guy.

2.  You reported the money as income.

3.  He used a shell company to avoid paying fica/mc on the money.

4.  He failed to file a form 709 to report the taxable gifts on the amounts above $10,000.

If your friend *did* report the taxable gifts, that $116K was waaaaaaay more than the prevailing wage and your bud didn't give every employee gifts, just you (or alternately, didn't limit such extravagant gifts to employees), then, yeah, maybe you could argue you did your taxes wrong...and even though it dates back to 2001, the statute is 3 years from when you filed or 2 years from when you paid the tax whichever is later, so the statute is still open.

You'd have to take it tax court though...and the last woman who did lost.

Answer 5

You can only file for a refund 3 years from the April 15 due date for that tax year.  So it is too late to unclaim any income before 2005, even if you could somehow convince them to believe you.

Answer 6

You can do a 1040x. I am sure they will audit you to find out why you thought you had more income. Usually people under report income.