Legal issues around commissions/invoices

[TB_]

Wonder if anyone can help me, I have a client who gives me work, but always insists on taking his percentage. For instance if I quote 3 days for a job he will say put in a quote for 4 days, which he then authorises, we get paid, do the work, and then he'll send us an invoice for the 1 day. In terms of an invoice, we always put in a valid reason for the work and time, but he is not a company (actually he uses his wife's name) and there is no VAT number (which is not a problem as we get 4 days VAT and pay 4 days VAT).

The issue is that my financial ***, has said that if we do not take reasonable steps to ensure all tax is paid by suppliers that we could be personally liable for their tax evasion.

So the question is are we acting in-properly by paying the money to him (as far as I'm concerned if I'm gettig paid what I want and he is milking his own company, then it is his problem not mine) and secondly is there anything he could put in his invoice that would be seen as taking 'reasonable steps', and thirdly are we liable in any way.

Thanks in advance for any advice

Tony

[debrown3rd]

(My understanding)

Since he is not a corporation (S/C/LLC, etc), he is then considered a 1099 with your company and you will need to file the 1099's yearly. You will need his SS#, name etc. I would recommend picking up a W-9 from him. It would concern me a little that he is doing it in his wifes name, however, it shouldn't make a bit of difference if you have her information on file.

There is no real reason to make up whatever reason for the work that he is getting paid. Call it a finders fee.

If he was a corporation, then you would not be responsible for reporting the income he has received.

PS. 1099s were due a few months ago for 2004!

So,

"So the question is are we acting in-properly by paying the money to him (as far as I'm concerned if I'm gettig paid what I want and he is milking his own company, then it is his problem not mine) and secondly is there anything he could put in his invoice that would be seen as taking 'reasonable steps', and thirdly are we liable in any way."

1.) You are not paying him incorrectly, but you do need to file the 1099's and have their information to do so on file.

2.) Reasonable steps for what?

3.) You are liable for the taxes on the money sent to him unless you 1099 it assuming you want to be legal ;)