Here is a story of one very sad audit that I had a chance to be a part of.
Once upon a time, there was a truck driver.
He was very hardworking, honest, and had one and only goal: to earn an honest living and support his family. He spoke limited English (very good native language, though) and, of course, had friends who spoke limited English.
He asked the friends for advice on tax reporting. They were very happy to help, based on their limited experience regarding the US tax law.
Long story short, the guy was issued a 1099 for the gross amount he and his partner together received while both were doing their honest business in the US. The partner was probably happy that he received NO 1099 at all, and all earnings were assigned just to the truck driver, the honest guy.
“Why the gross amount?” you would ask. Well, the knowledgeable friends thought that’s the right way to send a 1099.
As a result, the truck driver was on a hook for the total amount that was charged by the company that issued him the 1099, plus the same amount for his partner. The issuing company didn’t deduct anything from that 1099, even though he received a half of the half of that money as his earnings, or 25%.
The guy was totally screwed. Hundreds of thousands of dollars, endless audits, endless IRS letters, and God forbid, the immigration scare.
I’m all for immigration, foreign languages, etc., but please don’t just assume that if you have a friend from your native country who is willing to help (and charge money for the help), that friend will know the US tax law.
Let’s now all, please, pray for the truck driver.