Thanks Ruth. Your experience in these cases is invaluable. NCCPAP is fortunate to have your comments.
Very truly yours,
ROBERT S. BARNETT
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Original Message:
Sent: 7/16/2023 5:33:00 PM
From: Ruth Kraft
Subject: RE: IRS audit question
We are seeing this type of inquiry with greater frequency in the construction industry above all others. From a regulatory perspective, it may well indicate joint employment, which is being litigated routinely now. Control over the means and not simply the outcome could be problematic. All the items Robert mentions are significant. Additionally, in the absence of a B2B contract and if payments were made to individuals, not entities, those factors militate toward covered employment.
The biggest problem these days is that each of the administrative agencies, state and federal, uses a slightly different standard to complicate things even further.
Ruth Bogatyrow Kraft, Esq.
Falcon Rappaport & Berkman LLP
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Original Message:
Sent: 7/16/2023 3:27:00 PM
From: Robert Barnett
Subject: RE: IRS audit question
Brian is on point. This is a very aggressive audit position depending on the facts. If the Contractor controls the work efforts then perhaps he is an employee – you must look at all the factors (does he work with other contractors over the years, set his schedule, use his tools and equipment, pay all his business expenses, etc. ). Is there a contract? If they are all employees of the major contractor, then the computations get more complicated because the auditor must back out the payments your client received for the subs. Also, your client should not be the one charged with SE tax – the contractor must pay the employment taxes. You must consider open statutes of limitations and file for protective refunds – did your client pay employment taxes and file w-2's for the employees? Much to unpack here.
Very truly yours,
ROBERT S. BARNETT
Long Island Office:
487 Jericho Turnpike (NEW ADDRESS!)
Syosset, New York 11791
516-931-8100
Fax: 516-931-8101
New York City Office:
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212-661-1144
Fax: 212-643-1330
www.cbmslaw.com
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Original Message:
Sent: 7/15/2023 3:45:00 PM
From: Brian Gordon
Subject: RE: IRS audit question
Herman,
Does the carpenter only do work for this one contractor or is he in his own business as an independent carpenter?
The IRS auditors can be very aggressive. You should analyze all of the facts before you accept the auditor's position.
Brian
Original Message:
Sent: 7/14/2023 8:23:00 AM
From: Irene Wachsler
Subject: RE: IRS audit question
Herman,
Do you agree with the auditor/RO? There may be significant taxes and penalties involved here.
Please feel free to contact me.
irene
irene@iw-cpa.com
781.883.3174
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Irene Wachsler, CPA
Wachsler CPA LLC
Contact:
Irene Wachsler,
Trusted Biz Advisor for small business & gig economy
Cryptocurrency Tax Reporting
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Wachsler CPA , LLC
Cell: 781.883.3174
Email: irene@iw-cpa.com
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Original Message:
Sent: 07-13-2023 03:29 PM
From: Herman Ortiz
Subject: IRS audit question
I have a carpenter that is getting his schedule C audited. The IRS agent says that he should have received a W-2 from the general contractor and should have not prepared a Schedule C, because he is an employee of the general contractor. The carpenter also paid other workers on behalf of the general contractor. The IRS agent said they should have all been given a W2 from the general contractor. He paid each of his 5 workers $30,000 and my client got paid $125,000. If the IRS agent is correct, how would the W-2 to my client look like?. I believe my client's W2 boxes 1,3 and 5 would be $125,000 and boxes 2,4, and 6 would be zero, is this right. I tried running on this on the tax software but it is not generating the amount of Social security and medicare taxes that he would owe.
I have always been told to gross up the wages to reflect the net amount that the worker received but that may not be the case. If I grossed up my clients wages his gross wages would be $175.000 and net pay would be $125,000.
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Herman Ortiz CPA
Herman P. Ortiz CPA PC
Melville NY
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