When a Bad Time to Buy Might be the Right TIme?

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Stryprod_IHB

New member
Family Size 3 - 2 adults and 1 child

Annual Income: 80K

Current Rent: $1400 - 2 Bedroom 1 Bath, decent/ ok aprtmnt in Orange, CA

Mnthly Revolving Debt: $125

Saved Money: $15K

Maximum Mnthly Payment we'd want to pay: $1900
 
You should look for a new employer. Like now. People (that I know) have gone to jail for paying farmworkers (without documentation) the way you are being paid. You are not without responsiblity in this situation, and not in my eyes, but those of the IRS.



Jail sucks.
 
[quote author="no_vaseline" date=1237439994]You should look for a new employer. Like now. People (that I know) have gone to jail for paying farmworkers (without documentation) the way you are being paid. You are not without responsiblity in this situation, and not in my eyes, but those of the IRS.



Jail sucks.</blockquote>


IRS wouldn't likely throw him in jail, just nail him for back income taxes, back self-employment or social security taxes, penalties, and of course interest, etc.



I'd be scared of an accounting or organizational change at a company that was paying me under the table... Some new guy in accounting and bang, you get slapped with a 1099 for an entire year's comp you thought was free-and-clear of the IRS. Happened to me actually. Fortunately it was only $5K worth of consulting work, but I felt it at tax time.
 
Too early to look at buying Stry. The low end has fallen faster, but you'd be better off waiting one more year I think. I don't think you have enough saved to take on owning either. You should be able to handle the down and still have 3-6 months of reserves. Even on FHA, buying something would chew through all your savings...
 
[quote author="ipoplaya" date=1237441907][quote author="no_vaseline" date=1237439994]You should look for a new employer. Like now. People (that I know) have gone to jail for paying farmworkers (without documentation) the way you are being paid. You are not without responsiblity in this situation, and not in my eyes, but those of the IRS.



Jail sucks.</blockquote>


IRS wouldn't likely throw him in jail, just nail him for back income taxes, back self-employment or social security taxes, penalties, and of course interest, etc.



I'd be scared of an accounting or organizational change at a company that was paying me under the table... Some new guy in accounting and bang, you get slapped with a 1099 for an entire year's comp you thought was free-and-clear of the IRS. Happened to me actually. Fortunately it was only $5K worth of consulting work, but I felt it at tax time.</blockquote>


Is there a way I can avoid this by doing something on my own? My employer can't do a pay stub so what can I do... still no one has answered the question though :)
 
[quote author="Stryprod" date=1237442138][quote author="ipoplaya" date=1237441907][quote author="no_vaseline" date=1237439994]You should look for a new employer. Like now. People (that I know) have gone to jail for paying farmworkers (without documentation) the way you are being paid. You are not without responsiblity in this situation, and not in my eyes, but those of the IRS.



Jail sucks.</blockquote>


IRS wouldn't likely throw him in jail, just nail him for back income taxes, back self-employment or social security taxes, penalties, and of course interest, etc.



I'd be scared of an accounting or organizational change at a company that was paying me under the table... Some new guy in accounting and bang, you get slapped with a 1099 for an entire year's comp you thought was free-and-clear of the IRS. Happened to me actually. Fortunately it was only $5K worth of consulting work, but I felt it at tax time.</blockquote>


Is there a way I can avoid this by doing something on my own? My employer can't do a pay stub so what can I do... still no one has answered the question though :)</blockquote>


You can claim the comp on your tax return regardless of how they elect to pay you. You'd be obligated for both sides of employment tax, 15%, if the employer isn't/wasn't paying it. The employer doesn't dictate what you file with the IRS. They just dictate whether or not they are employing you officially, i.e. paying via payroll and paying employer-side taxes, or unofficially via direct payment. If you are getting paid UT, it had better be in cash vs. company check. Too much paper trail there. I assume you aren't getting reported to the FTB by the company on a DE 542 (independent contractor reporting) because if you are, the FTB will get all nasty on you...
 
[quote author="ipoplaya" date=1237442122]Too early to look at buying Stry. The low end has fallen faster, but you'd be better off waiting one more year I think. I don't think you have enough saved to take on owning either. You should be able to handle the down and still have 3-6 months of reserves. Even on FHA, buying something would chew through all your savings...</blockquote>
Agreed, I would also wait and save money in the meanwhile. Maybe move into a larger 2bed/2bath rental...I've been seeing 1,000+sf IAC rentals going for $1,700/month. The one problem that you may have to deal with when you are ready to buy is how is the bank going to verify your income if you are being paid under the table??? I mean, it's not like you can give them tax returns.
 
Some practical ways to avoid a potential issue when getting paid UT:



1. Have the company pay your rent directly

2. Get paid in cash, its harder to track/audit

3. Have the company procure gift cards, cash cards, prepaid credit cards on your behalf vs. giving you cash or a check
 
I would say just wait. First time buyers are often very surprised by all of the extra costs for maintenance, repairs and improvements. You are also going to have pretty extensive child care costs unless you have a free family member available. Just ask IPOP and myself, we'll give you an earful on childcare costs. I couldn't quite understand if you are expecting another child or not. The problem I see is that you are unlikely to find something you like in your price range AS IS, and you won't have any money to fix things up. I'd rent a bigger place that has everything you need. No sense in strapping yourself down to what could become a still depreciating asset, especially if it's not one you love and want to live in for many years. Just my 2 cents. I think 1-3 years is a good amount of time to wait while you watch what the market does and move into a situation where you have documented income.
 
Argh, don't get me started on childcare tmare! I am looking forward to September when the monthly childcare spend drops for us by almost $1200 per month... Of course by then I'll be unemployed or making a good bit less, so there really won't be any real benefit. Recessions suck.
 
1. I'd wait on an apartment. 15k isn't nearly enough to purchase a condo. For 1900 a month that'd put you into a 200k condo, doable, but its not what you want. I'd say the idea is 50-100k as a start with a FHA. BUT you WILL need income documentation or a rather large "wad" of cash. Preferably both.



2. As for under the table taxes, just say now, or start a little business and claim the income. Believe me, if you have EVER been audited, you will find anything done in the HellRaiser Movies series to be pleasant.... On top of taxes, fees, fines and if you should require... a lawyers fees. You'll think that paying taxes would be a vacation.



3. Good luck and I hope things work out, i'm sorry its not what you want to hear, but hopefully its what you need to here.



-bix
 
Thanks everyone for the replies but no need to say "sorry" for telling me I shouldn't get a house yet... I'm cool with that, I just wanted to know if the math worked out when you calculated 8K tax credit vs. perceived drop in lower end condo/ SFH prices.



I think I will wait and pay down some more of the debt I have and save some cash.



As far as child care cost, we're lucky enough to have Grandma watch our child for free, although we insist and do pay her a little for doing so. I can't imagine affording it any other way, it would almost make more sense for one earner to stay home.



Lastly, I think I will try to claim the income as my own "home" business so at least it doesn't look like I fell off the face of the earth
 
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