Tax Question

[KelliShaver]

I'm looking for advice on how to handle this. In 2004, I did some contract work for a company, providing web design services, etc. They were supposed to send me a form 1099 at the end of the year, but never did. I tried to get it from them on several occasions, but they never sent it. I'd kept good records on my own anyway, so I didn't think it was an absolute necessity that I get the form from them. This was my first year out of college and my first time doing contact work. It was my understanding that it is not uncommon for the person doing the freelancing to be responsible for all record keeping and reporting in this matter anyway, that not all companies will fill out your form 1099 for you, so again, I didn't press the issue when after the 4th request they did not send me the forms. I reported all of my earnings on my 2004 tax return.

I left the company on very bad terms. They tried to screw me over in every direction possible and after months of enduring it, I left. We are not on speaking terms. We will not be on speaking terms. The only contact I will have with this company is through an attorny.

Fast forward to today. I get a letter in the mail from the IRS saying that I didn't report all of my income from said company. The income they reported sending me is several thousand dollars more than I actuall received. After 2 years of fees and interest and penalties for "non-payment" this has reached a substantial amount of money that I don't have and that the IRS wants a response on within 21 days.

Now, I know my records are not off, especailly not by the amount the IRS claims. I don't have check stubs from this company and most of the payments that were made to me (aside from maybe 3 checks over the course of 9 months) were sent through PayPal. I have "virtual" receipts.

Furthermore, the payments I received were from the company that I was contracted by. However, it was apparently reported to the IRS under a different company, which the CEO of the company I was contracted for also owns. Perhaps this company acts as a parent company to the one I was contracted to work for. I do not know, but the IRS shows that my payments came from them, not the company listed on all of my receipts and funds transfer records, and not the one I signed the contract with.

All the paperwork I have received from the IRS is very confusing. WTF do i do? I am going to call them tomorrow and work on getting this sorted out, but I am extremly confused and angry at my former employer for doing this. I would appreciate any thoughts or opinions.

[s2kinteg916]

You are going to have to go to a tax accoutant ... If your tax accountant says he or she cant help you find another....

[AndyH]

I'd start by talking to a tax lawyer.

[KelliShaver]

Thanks, guys. Do you think I should speak to a lawyer before phoning the IRS? I have nothing to hide from anyone and have done everything within my power to make everything I've reported as accurate as possible.

[AndyH]

I would talk to the lawyer first just so you know where you stand.

[Cutter]

Tax lawyer, it will make your life easier. That company could get in trouble for tax fraud too, because assuming you never saw the money, someone has it.

[paul]

Do NOT talk to the IRS first! When you get outside the "normal" tax situation there are a whole host of grey areas which a good tax person knows. They know how long things get backed up at the IRS, they know what kinds of things the IRS lets slide and which they are sticklers for. It's not nearly as cut and dried as you might think.

[KLB]

Your first step is to get a tax lawyer before talking to the IRS. All communication with the IRS should only take place under the advice of your lawyer. You could be in a serious fix and you need to make sure someone who knows the law and the system is looking out for your interests.

[KelliShaver]

Thanks, guys. I will definitely be calling around tomorrow so I can get some help on this. What annoys me the most is that the majority of the money I "owe" is in fees and charges for non-payment. It doesn't make sense how they can charge me for 2 years worth of penalties for non-payment when the only reaosn it took this long was because they were so backed up and slow to notify me of the issue.

[KLB]

For future reference, I recommend always having your taxes done by a tax accountant and I don't mean one of those cookie cutter tax places like H&R Block. I'm referring to old fashion accountants who actually spends years building up a client list and who actually looks at their relationship with you as a long term investment. Yes a good tax accountant is more expensive than going to your corner tax preparer or using some canned software package, but what you are paying for is someone who will stand by your side when the chips are down and the IRS has come knocking.

[bbolte]

For future reference, I recommend always having your taxes done by a tax accountant and I don't mean one of those cookie cutter tax places like H&R Block.
Amen to that brother! Mine has saved me much frustration over the years.

[KelliShaver]

Yes. I have one that does them now, just didn't then. Have a call in to him, but he's out for the holiday and won't be back 'til Tuesday.

[demosfen]

So your former employeer appears to be reporting higher expenses than they have? I believe when you report somebody to IRS for tax fraud, they pay you certain amount (or percentage). Why don't you report them and get your %? Who knows what else an audit would uncover, you might make a bit of cash on this.
Once they are under investigation, I would apply for extention on your 2004 tax return, citing pending investigation against your former employer as the reason. If this works out, you won't need a lawyer... In any case keep us posted, I'm very curious to know how IRS handles these situations

[KelliShaver]

Something of an update on this.....

There was a small error on my return that I will need to pay taxes on (not much, about $2000 of income that I had under-reported), but that's no big deal, and if I made it, then I should pay the taxes on it.

As for the rest, they have all of my paperwork and documentation of income and what have you, and I shouldn't have to pay anything other than the taxes resulting from my own error. I should receive the final word on everything that all of the necessary adjustments have been made within 6 to 8 weeks.

I don't really know what's happened or what's been discovered or what's been determined other than the fact that it's not my fault, and they probably can't tell me much more than that since I apparently no longer need to be involved and the issue is now solely between them and the other company.

Heck, it could even have been an error on their part. I know a couple of people who have experienced that as well. Either way, it's sorted out and while I do have to pay some, it's of my own doing and it's a much smaller amount.