Ethics question. - Page 3 - PeachParts Mercedes-Benz Forum

Brian Carlton · #31 08-09-2013, 12:39 PM

Quote:

Originally Posted by MTI

Brian, that would depend on her employment status; either as an independent contractor (1099) or employee (W2), which hasn't been disclosed in the exemplar.

If the prepared taxes are legitimate, there is no fraud as to tax reporting.

Assuming that the tax reporting in the returns is fraudulent, what's the downside for the employee? The employer cannot bring suit for breach of employment contract, since they cannot enforce a contract to commit fraud. In a way, one has to examine where is the actual "leverage" in this arrangement? Without more information (employee at will? nature of expenses covered? dispute resolution procedures) it remains hard to assess the virtues or downsides.

Agreed. I'm making the assumption she is an employee.

Calling her an independent contractor is another can of worms that can easily backfire on the employer if the government makes even the slightest investigation. The rules for an independent contractor are very clear and very strict.

If the employee signs a fraudulent tax return, they are responsible for all the unpaid taxes and all the penalties associated with the failure to pay. The amounts can get really onerous.

It's the IRS with the leverage.

martureo · #32 08-09-2013, 12:48 PM

Quote:

Originally Posted by JB3

hmm. My feeling is that this may possibly be perfectly legal based on loopholes, but its really complex and I believe it to be unethical. The savings must really be there for them to spend all this time working out this plan, but she must be party to a very complex and I believe very fragile arrangement where if ANYTHING goes wrong, shes the one who's screwed.

Who does she complain to if by this shady agreement the company suddenly starts putting less reimbursement in her account? If its called a reimbursement, whats to stop them from truly auditing her actual living costs, and paying ONLY for them at some future point, while she is still a free employee for them and in a different country?

What is her medical coverage during this period? If shes not getting a salary, does she then become classified as a "temp", or a "volunteer"?

I think any contract must be reviewed with a fine tooth comb by her own lawyer, but I think id pass as this sounds good when you say it fast, but her personal arrangements and her employment would have become hopelessly entangled. Id stay away from it

Medical insurance is fully paid by the company. It's pretty good insurance too. (I know someone who has the same plan they offer)

And oh yeah.... you're not supposed to have legal counsel to make this decision. She might be in violation for showing me.

martureo · #33 08-09-2013, 12:49 PM

Quote:

Originally Posted by spdrun

This is mainly an end-run around Swiss work-permit laws, I'd suspect. I'd frankly go for something like that if I could get away with it, making sure I keep enough money around for a plane ticket home if need be. (Though it's much easier for me to obtain a Swiss work permit than the average American, so it wouldn't be needed.)

Actually, Switzerland has nothing to do with it. It was merely the first country I picked for the example.

This same position is held by others in countries all over the world.

spdrun · #34 08-09-2013, 12:51 PM

Quote:

Originally Posted by martureo

Actually, Switzerland has nothing to do with it. It was merely the first country I picked for the example.

This same position is held by others in countries all over the world.

OK, "local" work-permit laws. Though if it's a different country, I'd investigate carefully how THEIR tax and immigration departments work. What won't win you jail time in .ch might do so in (say) Saudi Arabia or Turkey.

aklim · #35 08-09-2013, 01:05 PM

I'd check legal first before I make a decision.

BobK · #36 08-09-2013, 01:07 PM

In another movie they had a line," if it ain't stealing, how come we're hiding it?"

SwampYankee · #37 08-09-2013, 01:17 PM

We employ several independent contractors (sales representatives) in new territories to represent our company, essentially our sales materials in their portfolios. For the most part, once compensation terms and amounts are agreed upon, we must remain hands-off with their day-to-day operation. It sure sounds like she may fall under any one of, if not all, the below categories and might even be considered a statutory employee regardless of what they call her. Of course that's my dummy interpretation, I leave our independent contracts up to our accountant and lawyer.

From the IRS:

Quote:

Common Law Rules

Facts that provide evidence of the degree of control and independence fall into three categories:

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

martureo · #38 08-09-2013, 01:18 PM

Quote:

Originally Posted by MTI

Brian, that would depend on her employment status; either as an independent contractor (1099) or employee (W2), which hasn't been disclosed in the exemplar.

If the prepared taxes are legitimate, there is no fraud as to tax reporting.

Assuming that the tax reporting in the returns is fraudulent, what's the downside for the employee? The employer cannot bring suit for breach of employment contract, since they cannot enforce a contract to commit fraud. In a way, one has to examine where is the actual "leverage" in this arrangement? Without more information (employee at will? nature of expenses covered? dispute resolution procedures) it remains hard to assess the virtues or downsides.

While I couldn't get an exact answer I did find a few lines in the packet which they delivered which makes the situation a bit more interesting.

The individual is stated to be a "volunteer" and therefore "no employer-employee relationship exists between you and ********. As a result, any funds reimbursed to you from *********** are not considered income for tax purposes; they are not reported to the government, and taxes are not withheld with regard to these funds.”

And further on....

"To avoid raising unnecessary tax questions, please follow these guidelines closely: Do not share information on funds you receive from ******* with those who help you with financial or tax matters…. Never represent in any way that you are paid for your service. If you are required to file an income-tax report for other purposes, do not list any funds you receive from ********, regardless of where you [are positioned] or where you hold citizenship.”

“the amount of any funds reimbursed to you should be kept strictly confidential.”

I don't want to post too much, but this just doesn't seem very kosher. Regardless of the legality of it. (Which is still up to debate, but there are around 100 other people across the globe in this same position).

link · #39 08-09-2013, 01:20 PM

...but there are around 100 other people across the globe in this same position).

Aw, gee mom, everybody does it

Run away.

SwampYankee · #40 08-09-2013, 01:22 PM

Quote:

Originally Posted by martureo

While I couldn't get an exact answer I did find a few lines in the packet which they delivered which makes the situation a bit more interesting.

The individual is stated to be a "volunteer" and therefore "no employer-employee relationship exists between you and ********. As a result, any funds reimbursed to you from *********** are not considered income for tax purposes; they are not reported to the government, and taxes are not withheld with regard to these funds.”

And further on....

"To avoid raising unnecessary tax questions, please follow these guidelines closely: Do not share information on funds you receive from ******* with those who help you with financial or tax matters…. Never represent in any way that you are paid for your service. If you are required to file an income-tax report for other purposes, do not list any funds you receive from ********, regardless of where you [are positioned] or where you hold citizenship.”

“the amount of any funds reimbursed to you should be kept strictly confidential.”

I don't want to post too much, but this just doesn't seem very kosher. Regardless of the legality of it. (Which is still up to debate, but there are around 100 other people across the globe in this same position).

Holy shnikeys! It just gets messier. I'd run away. But I'm an overly cautious pessimist, well versed in the Laws of Mr. Murphy.

BobK · #41 08-09-2013, 01:25 PM

Dad is a retired IRS agent. When they haul her in to talk to them she should remember this: When the agent she has been contacted by introduces two more agents as "This is SPECIAL agent so-and-so and this is SPECIAL agent such-and-such" (those are the guys that carry guns) She should reply ,"I want my lawyer now!" and say NOTHING else. It's goning to be a very bad time.

spdrun · #42 08-09-2013, 01:29 PM

Link: I would, and I'd just report any income above actual reimbursements as self employment income earned while living outside the US. Covers my butt and no double taxAtion since I'm not being paid officially abroad.

The company is very unlikely to pull my 1040, and if I'm fired after a year or two, at least I'd have had an interesting trip. And as long as I pay, the emPloyer may have trouble, but I won't.

link · #43 08-09-2013, 01:41 PM

Quote:

Originally Posted by spdrun

Link: I would, and I'd just report any income above actual reimbursements as self employment income earned while living outside the US. Covers my butt and no double taxAtion since I'm not being paid officially abroad.

The company is very unlikely to pull my 1040, and if I'm fired after a year or two, at least I'd have had an interesting trip. And as long as I pay, the emPloyer may have trouble, but I won't.

That’s okay with me, if you want to do that. I try to avoid conflict with the IRS and playing into this kind of scam does not serve that end.

That said, I’m sure it could be worked out on paper so that there is no scam overtly or by implication, but for reasons unknown to us, that is not the offer the person has been given.

Can't Know · #44 08-09-2013, 01:44 PM

If this is a large and reputable company, then there isn't really any mysterious phenomenon going on here.

It's simple: the reason they are doing it is to leverage the laws.

So they are structuring the arrangement -- legally -- to avoid paying taxes either here or there. If it's a multinational company, then they probably know exactly what they are doing.

And I'm not sure why some are focusing on the reimbursements. Reimbursements for expenses incurred in business are deductible; they aren't income. There's nothing illegal about that. And the IRS is well aware that some multinationals take advantage of foreign laws in structuring arrangements. I can't imagine they are doing anything "funny" with her tax returns (or those with whom they have done this in the past).

In the big picture this is no different than what GE does with it's structured arrangements. That's one of the reasons they are pilloried for not paying much tax. But what is illegal about structuring a situation to take advantage of various loopholes?

So long as it is legal, then it's up to her to decide if it's immoral. Personally I wouldn't feel comfortable about being in a situation where I couldn't really establish any friendships, which she can't really do, since she can't be honest with anyone she meets over there. Perhaps this is why I never applied to the CIA, etc.

martureo · #45 08-09-2013, 01:48 PM

Quote:

Originally Posted by Can't Know

If this is a large and reputable company, then there isn't really any mysterious phenomenon going on here.

It's simple: the reason they are doing it is to leverage the laws.

So they are structuring the arrangement -- legally -- to avoid paying taxes either here or there. If it's a multinational company, then they probably know exactly what they are doing.

And I'm not sure why some are focusing on the reimbursements. Reimbursements for expenses incurred in business are deductible; they aren't income. There's nothing illegal about that. And the IRS is well aware that some multinationals take advantage of foreign laws in structuring arrangements. I can't imagine they are doing anything "funny" with her tax returns (or those with whom they have done this in the past).

In the big picture this is no different than what GE does with it's structured arrangements. That's one of the reasons they are pilloried for not paying much tax. But what is illegal about structuring a situation to take advantage of various loopholes?

So long as it is legal, then it's up to her to decide if it's immoral. Personally I wouldn't feel comfortable about being in a situation where I couldn't really establish any friendships, which she can't really do, since she can't be honest with anyone she meets over there. Perhaps this is why I never applied to the CIA, etc.

Just to let you know, this is a position also offered in the US with the same rules. I can say that it's a US based (and headquartered) company.

View Poll Results: What is your choice?
Tell her to do it! The money is good and there are no ethical/legal issues to worry about.	2	12.50%
Tell her not to do it. They money may be good but it sounds illegal and is definitely unethical.	8	50.00%
It's her choice, I'm not bothered by the legal/ethical aspects.	1	6.25%
I'm dialing the IRS as we speak... and it will be on the 10 o'clock news.	5	31.25%
Voters: 16. You may not vote on this poll