Re: Hired friend to do work for client - he wants cash.


"Ned" <1crazyrican@xxxxxxxxx> wrote
I am located in new York and I am a full time employee with a small
consulting business on the side. I recently hired a friend who also
works full time to do 16 hours of work for my client at $50/hr CASH.
Aside from this he does no other freelance work. I did not think
carefully about my decision and I now realize that I will really be
paying him closer to $75/hr. I want to know if I could report this in
my taxes


You have every right to deduct all legitimate expenses of running your
business.

The issue is if you can support the expense (paying in cash makes it that
much harder to prove out), and the second issue is if you should have
reported it via a W-2 or 1099-misc.





without having my friend pay taxes on the $800 dollars. I read
something about a $600 minimum threshold. Could I pay him
$600 by check and he would not have to report it?




It doesn't matter if you deduct the amount paid to him or not, and it
doesn't matter what amount you pay him or in what manner (cash, check,
credit card) he is required to report all income from whatever source
derived.

You should be concerned about YOU and your responsibilities and legal
obligations and let him worry about his own problems.

Pay him the contracted amount, file the proper forms that you are required
to file, let the chips fall where they may.




FYI: The $600 is the amount above which you are required by law to issue a
1099. The law does not prohibit you from issuing a 1099 for a smaller
amount paid to contractors and service providers.

If you only pay him $100 he is required by law to claim it on his returns,
even though you are not required to issue a 1099.







--
Paul A. Thomas, CPA
Athens, Georgia


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