Rookie mistake- need help

[Shannon Beavers]

I hired someone I know to paint our flip house. We paid them an hourly rate and it took them way too long and cost us a few thousand, which was way more than it should have cost us but I was trying to be supportive and help some one out who needed some additional cash.  Today I get a letter saying they filed an unemployment claim. I didn’t hire this person but I also did not get a 1099 either as they are not a professional painter. Although they started a painting business after we no longer needed them. I have to send a letter back to the department of labor either with an agreement to pay back taxes and fines, plus unemployment or I have to dispute which says I may end up in court. We didn’t really make much of a profit on our first flip. What do I do? 

[Wayne Brooks]

@Shannon Beavers You don’t “get” a 1099....you issue one to the person.  This was clearly an “independent contractor” and you need to issue the 1099.  I assume this was last year? You’ll have a penalty but it’s much better than getting involved with unpaid payroll taxes, withholding, large penalties, etc.  You need to talk to a cpa now.