Expert: Mike Wellman - 3/6/2008

Question
question. My job seems very shady. To make a long story short, its a family owned business. Every week the father comes into my office and changes his expense amount. It is usually half his salary.
Example: his weekly salary is $2750. He tells me to put his "salary in paychex" as $1250 and he wants a weekly $1500 expensive reimbursment. He has been doing this since I started here. Is this tax fraud? HE gave me sopme bullshit excuse that its a loan being paid back to him and the mother. But he is not being taxed on it....my being the payroll supervisor, I am getting worried about my future if anything goes down. Does this situation seem fishy to anyone?

Answer
It sounds fishy but I do not really have all the facts to make that determination. If he has no receipts to back up his expense report though I would say that is a strong indication. On the other hand, there may be a loan from officer on the books in which case it is OK. Also, if it is a Sub S corporation, he can take non-salary distributions that are not subject to payroll taxes but will eventually show up on his personal tax returns as taxable distributions.