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Are You A Ghost Employer?

Some people think they are so slick. Others genuinely don’t know the proper way to administer payroll and/or payments for contracted services. Handwritten 1099s and W-2s are a red flag that people have no clue or are trying to do something raggedy. Derrick Guiliam, Director of the IRS Small Business Self Employed unit said that they are playing no games with fraudsters. So don’t get caught up!

The Ghost employer project is a new and special initiative the IRS has launched to address the issuance of fraudulent employee tax documents. I believe that this initiative was launched to address the rampant fraud around PPP loans. In this scheme, bogus businesses prepare payroll tax returns in order to maximize their PPP loan amount. However, the reports and corresponding employee documents are not filed. Another scheme occurs when a bogus employer issues a W-2 or 1099 to an employee (but not really) to prove income, but the corresponding W-3 or 1096 form was not prepared or filed.

I have had clients who truly did not know how to properly administer payroll, which is highly dependent upon the type of entity in operation. Seriously, business owners don’t try to do this stuff yourself. It can be very costly unnecessarily. If you issue W-2 forms to employees, you must also prepare and file form 941 as well as the appropriate state payroll tax forms. These forms report the employee payroll by quarter. At the end of the year, the quarterly payroll tax returns must equal the amount paid to the employees on form W-2. You cannot just write the amount you paid your employee in the wages box and send them on their way.

Hire a professional. 


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