did I help my mother embezzle money?

by Alison Green on January 29, 2025

A reader writes:

This is not a current issue, but it’s something that has been eating at me for a long time. I’m trying to figure out if I unwittingly helped someone embezzle money. I believe the statute of limitations has passed for this (potential) crime in the state that it took place in. It has been 15+ years now.

My mother has always been a little shady with business her practices. I do not believe she has any qualms about “bending” the law. She is also very charismatic and I suspect would be quite an effective cult leader (i.e., good at talking people into things, frequently nefarious). I’m only mentioning this because it seems like important context to have.

She was the CEO and one of the owners of a small business (35-50 employees) that no longer exists. She had two other business partners who helped her start the company. This was a corporation so none of their personal finances should have been directly tied to the company.

She put me on the payroll at 13. I helped out at the office probably 3-5 times total between the ages of 13 and 16, so I was not a regular employee. I did things like cleaning and filing. I don’t recall seeing paychecks for anything during that time, though it was quite a long time ago and my memories of this are a little fuzzy. I do remember one incident pretty clearly though. When I was 18, I was given a paycheck and asked to sign it over to her. I had not done any work for this company for quite some time. And I certainly wouldn’t have made the amount the check was written for. I believe it was just under the amount that would have been reported to the government on taxes (I think $10,000 is the threshold). I did see the check and this was definitely a paycheck from the business. She said the money was going to be used for a personal expense. She specifically told me that it was all legal, so I did what she asked.

So, is any of this actually legal? Additionally, could she have been doing this while I was underage? Are there any details that would change the legality of the situation? I’m wondering if she found some sort of loophole that may not have been ethical but still legal.

Even though I was told it was legal, it felt off to me and I made excuses not to do it again. She was Very Not Happy when I wouldn’t do it again, which adds to my suspicion.

The situation is over now, and I am no longer in contact with her. I doubt anything would come back to bite me at this point, but I still wonder if I could have gotten into legal trouble.

It almost definitely wasn’t legal.

If you own a private business with no fiduciary responsibility to anyone else, you can pay someone for any “job” you want, including one that does no work at all.

However, if you’re doing it just so they can sign over their paychecks to you, now you’re committing tax fraud. This can be nuanced and I’m neither lawyer nor tax expert, but in general:

Since the income was reported as a payment to you and you weren’t earning enough to pay taxes yourself, that money wasn’t taxed … and even if you were earning enough to need to file a tax return, it’s likely that your mom would have had been in a higher tax bracket than you, since you were a teenager. Either way, that’s tax fraud. Interestingly, there’s a rule that taxes a child’s unearned income at the parent’s tax rate in order to prevent exactly this. But if your mom was classifying it as “earned” when it wasn’t earned through work, we’re back at fraud.

I’m also curious whether she paid the business’ portion of the payroll taxes on the wages you received. (If she was paying you as a contractor, not an employee, then this wouldn’t be required. It also isn’t required when paying one’s own children when they’re under 18, but you were 18 for at least part of it.)

Additionally, by fraudulently “paying” you, your mom was lowering the business’s taxable income — another problem.

It’s possible there were other legal problems too, like if your “cost” was expensed to another entity. And if your mom’s business partners didn’t know what she was doing, she may have been violating laws about her fiduciary duties.

If the business were a sole proprietorship, that would change some of this, but it wasn’t.

However, your mom was the one committing fraud, not you. It’s extremely unlikely that any of this could ever have come back to bite you — but if your mom had been audited, it definitely could have bitten her.

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{ 123 comments }

{ 123 comments… read them below or add one }

  1. The Ginger Ginger*

    I want to emphasize Alison’s last point. You did NOT help your mother do this. This is all on her, and your instincts are INCREDIBLE that you only ever did this once for her. Anything else she did (even if she put your name on it as a minor child), you had no control over. If you’re feeling any type of guilt or anxiety over this, please don’t. This is all solidly on her shoulders. If anything, take as very strong affirmation that no longer being in touch with her is exactly the right choice (if you needed that affirmation from a total internet stranger).

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    1. connection timed out*

      I want to second that. When I was in mid-teens, I think my mother may have used me to commit some kind of fraud, although I don’t know what. I felt guilty about it and worried I was going to be arrested but… it was all on her.

      I think when you’re a teenager, you’re old enough to feel responsible for things, but you don’t have necessarily the knowledge the know if you are or aren’t. That’s where the aduls in your life are supposed to guide you. If the adults are pulling you in the wrong direction, it’s easy to feel like it’s your fault.

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      1. Ditto on that*

        I’m stealing your last paragraph to use for later, because I feel like it could be use in so many contexts outside of the professional world as well.

        Being a teen can be such a difficult time in your life because you’re starting to have more adult responsibilities and emotions, and you feel the need to prove to everyone (and themselves) that you’re not a young child anymore and that you’re fit for those responsibilities.

        I was the over-eager overachiever older sibling who paradoxically craved independence and the approval of the adults around me – which led to the managers at my first job in high school exploiting my work ethic without a single second thought on my part. What, sir? You need me to work three more hours, and you told me fifteen minutes before I clock out? Absolutely, boss! I’m not like those other bratty teens who would whine! I’m a team player!

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    2. Observer*

      I want to agree with this as well.

      Whether or not your mother committed fraud is one question, and the answer sounds like probably yes. However, you did not help her in any way.

      And the fact that you even refused to sign anything ever again would have proved that if someone had tried to pin something on you.

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    3. Consonance*

      Yes, and the one thing that I would do at this point is to check and lock your credit score. Parents often do things like take out credit cards in their child’s name. I’d be very careful to look into anything that might be tied to you, and to lock your credit score so she can’t pull from your credit in the future. That’s not about how to prevent her from doing bad things in general, but protecting you from her.

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      1. MK*

        It shouldn’t be allowed for minors to take out loans and get credit cards, and proof of identity should be verified in multiple ways. There are a lot wrong with the banking system in my country, but at least it’s near impossible to commit that kind of identity fraud (you would need to conspire with at least two separate bank employees, plus the mailman).

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        1. WheresMyPen*

          There was an episode of the podcast Criminal about a woman whose mother tanked her credit score before she was 18 years old by stealing her identity and opening credit cards in her name. This was back in the 90s so I don’t know if it was easier then, and how she managed to open credit cards in the name of a minor, but it happened somehow.

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      2. Sloanicota*

        This was my exact thought. You already know that your mom has no hesitation about using your identity for some shady things. I’m less worried about this specific situation coming back to bite you than I am about what else she might have done using your identity. Parents can do a lot of harm the child doesn’t even know about and they have access to all your information as a minor, which they can continue to use as the need strikes.

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      3. Insert Pun Here*

        Just to clarify this for anyone reading who has never had to deal with this (I’ve done it multiple times, sigh) — what you want to lock is your credit report, not your credit score (which can and will change even if you do this.) It is fairly straightforward to do: there are three credit reporting bureaus — Equifax, Experian, and Transunion. Each will have on their website an option to “lock” your credit report, meaning that lenders won’t be able to obtain your credit history and thus won’t extend offers of credit (ie new credit cards, mortgages, other loans) to you (or someone pretending to be you.) You will still be able to use your existing credit cards.
        If you’re the victim of identity theft (and frankly at this point I think we all are), you can also ask all three credit bureaus to add a fraud alert to your report. This lasts for a year and it’s an indication to banks, etc, that they should take extra steps to verify your identity before extending credit.
        If you are not actively seeking a loan/mortgage/new credit card/etc, it’s a good idea to just keep your credit reports locked at all times.

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        1. The Cosmic Avenger*

          I’d recommend a credit freeze rather than a lock. Most bureaus gouge you to lock access to your credit info, but a freeze has to be free by law. A freeze can take longer to remove and restore, but if you do it online it’s usually an hour or less. I’ve kept mine frozen except when applying for credit, and it’s worked pretty well.

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          2. Artemesia*

            If you do a freeze. be very careful to store the codes you need to unlock it in a safe place as it is not always easy to release. When we went to buy a condo after having frozen our credit after a data leak, even though I HAD the code, I could not release one of the freezes. I could not as a consumer get any human on the phone to help.

            I finally punched the number for a business and was able to get a human and throw myself on their mercy — we had a closing at risk. They basically said it had to be done with a registered letter and would take two weeks. This did not help. So I called again and got someone else who promised to get it done. That didn’t work. So I called again (each time on the business line. not the consumer line) and found someone who did manage to get it done. I was able to give them the code that I could not get to work.

            It should be easy to unfreeze on line but it sure wasn’t for us.

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            1. The Cosmic Avenger*

              Yes, it can be more difficult, I think it might be intentional since they charge by the month for a credit lock. So I’d advise anyone who wants a credit freeze, try unfreezing it online a time or two BEFORE you need it. Now that I’ve done it a few times, I’m a lot more confident about how far ahead to unfreeze it and all.

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          3. Red Reader the Adulting Fairy*

            I’ve never had a freeze that wasn’t lifted immediately on my request, and all three bureaus do what’s called a “thaw” where they lift it and re-freeze on your date of choice, so you can do a thaw for like two days.

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      4. MigraineMonth*

        One of my friends had to file a police report because her mother did this after she’d moved out and gone no-contact. The woman took out a credit card in my friend’s name, ran up a huge bill, and left the debt and credit damage for my friend to try to clean up.

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        1. Underemployed Erin*

          What her mother did was probably small business tax cheating (a lot of this goes on) and different from damaging your child’s credit.

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          1. Sloanicota*

            I don’t know OP or their mom, but since it seemed like the mom realized the child’s SSN was convenient to use for business purposes that advantaged them, it’s not a huge jump that they felt the child’s SSN might be good for other things. I know multiple parents who took out credit cards in their child’s name, and at least one who had some kind of weird business in their child’s name, which they opened without telling the child. In more than one case when the kid confronted the parent, the parent had no guilt and said they paid for so many things for the child they were “owed” this, or would pay off the credit card as soon as their ship came in, no worries …

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          2. Artemesia*

            Someone cheating using their child in business is probably the same kind of person who takes out credit cards in their child’s name. The OP definitely needs to take a good look at their credit.

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            1. N C Kiddle*

              Yeah, we know she’s dishonest and we know she is prepared to involve her child in her dishonesty. It’s not certain that this plays out in other ways, but it’s likely enough to be worth checking.

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      5. goddessoftransitory*

        I was going to say the same! LW, be sure to check and make sure there are no accounts out there that you don’t know about–your mom may be “financing” further ventures this way. If she started when you were under 18 there may be more than a few.

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    4. OP*

      Thank you. Seeing this as the first comment was really life-affirming in some scary times. I’m overwhelmed by how compassionate ALL of these responses are. I was trying to approach this factually and unemotionally but I think I actually did need that affirmation from a total internet stranger, lol.

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      1. MigraineMonth*

        It’s really impressive and speaks to your character that you stood up to your mother and refused to sign any more checks for her. I’m sure she trained you from a young age not to push back or ask questions, but you did so anyway at an age when most of us still heavily rely on our parents’ guidance.

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      2. HonorBox*

        OP, reading the facts, I got emotional on your behalf. Parents aren’t perfect, and we make mistakes, but putting your child in a position to unknowingly help you commit fraud and then having them tied in knots for years over the situation is not a simple mistake. I’m sorry this happened, and I’m so glad you’re getting the affirmation you need that you’re awesome and did nothing wrong.

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      3. The Ginger Ginger*

        Then, I’m glad I wandered by this internet spot today!

        I am also going to agree with the rest of the folks on the thread recommending you check on your credit report if you haven’t had cause lately. I’ve heard a lot of horror stories from folks with unscrupulous parents with access to all their kids’ identifying info.

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    5. HiddenT*

      Yup, whatever shady stuff OP’s mom was doing, it 100% was *not* OP’s fault. It could even be classified as a form of financial abuse (similar to when parents take out loans in their kids’ names and ruin their credit when they’re still minors).

      OP, I hope you have many wonderful people in your life now. You deserved better.

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    6. ferrina*

      Joining the chorus on this one- OP, you did not help your mother commit fraud. You were a child who had no reason to be aware or questioning what was going on. Accounting is not a responsibility of a child- many of us as children had our parents help manage our money without worrying about fraud.

      It’s very, very normal that you had no idea what was going on. Our parents are the ones who are supposed to teach us what “normal” looks like. Our brains are hard-wired to trust them, and even when we don’t trust them, we are so dependent on them as to be basically trapped. As a child, you 1) inherently trusted your mom, as you were supposed to, while 2) your mom taught you that whatever she was doing was totally normal, and despite that your incredible instincts kicked in and realized something was off, but 3) had no ability to do anything to impact what your mother was doing.

      OP, you did as much as you could and more than anyone could have reasonably expected.

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    7. C*

      Right. LW has no moral culpability for what their mother tricked or manipulated them into doing as a child, an adolescent, or a young adult. It’s normal for young people to trust their parents, and to be easily pressured by them – even if those people are not, as LW described, “charismatic”.

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  2. UnCivilServant*

    I’m terrible-minded. After reading the letter my brain went to “how to do this better” and came up with ways where a mother would be able to avoid having to get the child’s signature on anything while still performing the embezzlement.

    No, I don’t think I will share the thought experiment, it wouldn’t help anybody I’d want to help.

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    1. Science KK*

      Once I was helping out a coworker and we put on a true crime podcast to pass the time. We kept pointing out how easily we could’ve gotten away with it and how dumb the criminals were haha.

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      1. goddessoftransitory*

        I do this with a lot of fictional crime shows; which, granted, aren’t usually designed to be super realistic, but still. The Television Without Pity group that I watched The Following with regularly tore apart every aspect of the version of the FBI Kevin Bacon’s character worked for.

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    2. I Have RBF*

      I do that on really public cases. My mind goes “Where did the criminal mess up?”

      What the thought exercise tells me is that successful crime is harder than I want to bother with, even if I were so inclined.

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    3. Roeslein*

      Don’t get me wrong, I know plenty of examples where kids got paid disproportionate amounts of money for working in their family business, but at least they were actually paid as opposed to the parents keeping the money! (Also it meant they had early retirement contributions which depending on where you are can be valuable.)

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  3. Cupcakes are awesome*

    When I was a teenager I worked at a family owned store in the mall. My pay was minimum wage. They paid me with cash in an envelope with the gross listed, the taxes taken out, and the net pay. I received the net pay in cash. After a month or two I asked for a check stub and was promptly fired. I’m sure they were keeping the “taxes” and just paying me less. Although how cheating a teenager out of like $15 a week made a difference to them I’m not sure. I never did get a W2.

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    1. Peanut Hamper*

      AFAIK, paying in cash is not illegal, and used to be quite common. Your “pay packet” was literally an envelope with cash in it, and your hours worked and taxes deducted written on the outside. Used to be a thing at least into the 1970s, at least in the UK.

      It’s also illegal to not provide a summary of hours worked/money earned/deductions, although I don’t think it has to be a pay stub. I’m not sure if this is a federal rule or varies state by state. So I don’t think how they paid you was illegal, but it seems you might not have been on the books. It sounds very dodgy.

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      2. Phony Genius*

        In my state, paying by any method other than cash requires the written consent of the employee (or their union). I’ve heard stories of the old days where factories would pay in cash, and hire armed guards to protect the employees as they headed to the parking lot.

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      3. Myrin*

        I don’t think Cupcakes was saying that the paying in cash was the dodgy part but rather that the owners possibly withheld the taxes without actually paying them to the state

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        1. Peanut Hamper*

          Yep, but that would be on the employer, not the employee. The fact that they didn’t hand out W2s is both suspicious and illegal.

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    2. cat herder*

      I worked at a tobacco shop in college that paid everyone in cash (envelopes with our names on Fridays). The shop owner wore expensive suits and drove a new Mercedes, and also had that particular ex-military swagger of Someone Not To Be Trifled With, so nobody ever asked for paycheck stubs or W2s. We were just happy to be employed during the recession as experience-less college kids. He’s still in business 13 years later, and that business appears to be doing very well the last time I drove by, so he either has a very good (albeit unethical) accountant, or he went legit, lol.

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        1. Observer*

          Not just suspicious. It’s illegal.

          Paying in cash is fine. Not giving the tax documents is what shows that there is a problem.

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        2. One Duck In A Row*

          Yeah, and I think I was employed at a place doing this stuff, too, in the mid-90s. Definitely never got any tax forms or anything official in terms of paperwork, ever. It was only over a long break, thank god. Miserable experience in a retail clothing store, paid in cash, yelled at for not being loyal when they’d ask me to stay extra hours at the last minute because someone else wasn’t coming in (and I’d say no, because I was also naive enough to not think about whether I might get fired for that), etc. The big etc. for me was that the owner would have me walk with him while he walked to the bank with a big wad of cash to deposit. I’d say I was his bodyguard, but more like I was his hostage, or the person he *hoped* would prevent him from getting attacked by whoever it was he thought was going to do so?! Anyway, I wish I could go tell 19 year old me to leav that place immediately, because it was shady as f**k and possibly putting me in literal danger. (And maybe call me paranoid, but this was literally in a neighborhood that many people have only heard of because of mafia films/TV shows. So…)

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    4. Jill Swinburne*

      I once had a very part-time casual job where I was getting X amount per hour and receiving amounts that I’d expect with the tax taken out. Then months later I had to ring up the tax people for something else and during my discussions it turned out that that job was not in my file and – surprise! I now owed them tax on those earnings because I’d admitted to doing the work. The employer had been taking out my tax but not paying it. I was so pissed off, and there was basically nothing I could do.

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  4. Snarkus Aurelius*

    My dad did similar stuff all the time with our small family business. Whenever we did work as children, he’d note that he paid us minimum wage for so many hours except he never actually paid us or he’d pay for a school lunch ticket or copay at the doctor instead so we never actually got cash.

    I refused to do any more “work” for my dad as I got older. I have no idea if he continued to fraudulently note otherwise.

    No matter what, you and I did nothing wrong. Our parents did!

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    1. Dobby is a Free Elf!*

      This makes me stunningly grateful for the fact that my small-business-owning dad paid me legitimately–I got all the appropriate tax forms and everything–when I spent a summer working for him…

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    2. Ann O'Nemity*

      On the flip side is business owners who employ their kids in fake jobs but actually pay them, provide health insurance and 401k, and give them company cell phones and laptops.

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  5. Canuck Professional Accountant*

    An honest question: Does the US not have their own version of the ‘TOSI’ rules (ie. rules for paying non-arms-length individuals)? Here in Canada you can’t just pay people for no work. That seems like a major issue for business accounting.

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    1. Archi-detect*

      not really unless it is in some kind of corporation or something where a board whould presumably want to prevent it. I know property sales usually note if they were at arms-legnth or not (so as to not mess with property values I think), but that is all I am aware of

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    2. Sashaa*

      How do you prove they are genuinely doing actual work though?

      In the UK there are regular scandals about MPs (members of parliament, our government) employing their wife, kids and wider families in non-jobs in their offices, and claiming those salaries back from the taxpayer.

      Outright fraud, but it seems to be very hard to prove that their wife did literally nothing, and there is no law against paying somebody who turns out to be lazy and poorly performing.

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      1. Canuck Professional Accountant*

        It won’t surface unless the company is audited, but once audited by the Canadian Revenue Agency, the assumption is that the rules are being broken and it is on the company/employee to prove that the rules are being adhered to. Also all business related expenses must meet the CRA ‘reasonable business expense’ standard in order to be deducted against income. CRA regularly reviews and/or audits certain expenses to ensure ‘reasonability’ is being met.

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    3. learnedthehardway*

      In Canada here. I have been told by accountants that you can structure a small business to pay a certain amount to your children – but that it has to be reasonable and they have to actually do a certain amount of work. The benefits are that the kid starts an income stream and can start to accumulate retirement benefit amounts, as well as reducing the income (and taxes) of the parent. However, to me, this sounded like a great way to get audited by the tax authorities, and a whole lot of paperwork/administration/payroll to deal with.

      If one of my kids was seriously interested in the work I do and wanted to pursue this as a career, I’d consider how to make it happen, but it would have to be set up properly. And it would be their earnings, going into their bank account – it wouldn’t be right (or legal) for me to hold onto that money in my personal or business accounts.

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      1. Wonky Policy Wonk*

        Also a Canadian, and also had a parent that set up an income for my sister through his small business the same way you described – she was studying overseas and would come home for the holidays, during that time she’d do basic custodial/file management/etc work for my Dad’s company to earn a very nominal amount (well under $5,000 a year). My Dad was told this would be a great way to lower the taxable income for his company a bit and ensure my sister still built up some working hours for EI and contribute to CPP before starting her career after graduating.

        My sister never ended up moving back to Canada, she’s in the US full time now, so she’ll probably never use or need those EI and CPP contributions. She does, however, get a lot of borderline aggressive letters and emails from the CRA telling her she needs to file taxes for all those years she worked for my Dad (she has multiple degrees so it was over 10 years of schooling with ‘working’ holidays). Was definitely not worth it for her and not something anyone in my family would recommend.

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    4. Strive to Excel*

      In the US? Single business owner, no debt, no other owners? As far as I know you can hire whoever you like and pay them nearly whatever you want. As long as you pay all the correct taxes and are following all other forms of employment law (at least minimum wage, breaks, W2, etc), no one’s likely to stop you. But no one would want to since it’s a ridiculously inefficient method of transferring money. It’ll lower your business’s taxable income a bit but you’ll still have to pay payroll taxes, and possibly benefits, and you have to follow assorted IRS payroll tax guidelines. It’s just easier to gift the money and have done with it.

      If you’re getting government funding, any form of significant bank loan, or have more than one owner of the business, all those individuals now have a strong interest in the net business income. At that point you’re looking at forms of embezzlement and fraud, but it’s because you’re concealing information from your business partners.

      In short – you can, but doing it legally is enough of a paperwork PITA that it’s easier to gift the money and call it a day.

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    5. Judge Judy and Executioner*

      I am a former accountant in the US. I once worked for a family-owned company that had multiple family members on the payroll who never did any work. This is not illegal. What was illegal was claiming the owner’s wife had a “company car” when she did zero work for the company, which is tax fraud. Not that it mattered; this company also failed to file use tax and demoted the head accountant when he brought it up. I’m sure the IRS caught up eventually, but I was long gone by then.

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      1. Freya*

        Ditto here in Australia – family members on the payroll is fine, but giving them things that count as fringe benefits if they’re not to the benefit of the business without then lodging and paying the fringe benefits tax (and including the fringe benefits amount on their yearly income statements – it doesn’t count the same as being paid in cash for individual income tax purposes (the fringe benefits tax that the business pays works out to about the same as the employee would pay had they been paid in cash and were being taxed at the highest rate), but because it’s essentially being paid with something other than cash, for the purposes of child support and pensions and so forth it counts as assessable income) is tax fraud.

        * The definition of ‘fringe benefit’ is basically something that you get from the business that wasn’t cash and was mostly to the benefit of the employee and not the business. There’s exemptions for small stuff (<$300) and a few other things. People usually get caught out with staff parties that are too lavish, employers being nice and paying for private expenses like gym memberships as a gift, or paying for the kids' school fees.

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  6. Observer*

    LW, I totally understand why you are not in contact with your mother. I feel so bad that she is someone who you can not trust in any way, shape or form.

    I hope you have some *really* solid people in your life now.

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    1. OP*

      Thank you, I appreciate that. I now have my own (non-blood related) family that I chose and am now surrounded by good people :)

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  7. murr*

    The version I know is from small family businesses where they put all the family members down as employees and “pay” them minimum wage. But they never pay them and pocket the checks. Meanwhile the family members benefit from having an employment history that makes them eligible for Social Security.

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    1. CeeDoo*

      My mom put me on her business as a treasurer or VP or something I can’t remember. I never had anything to do with her business, which was bookkeeping, ironically. I wasn’t paid anything, though. She had to claim x number of employees for something, and we had different last names, so she wrote me down. I also used that on my resume when I was 17 and had only worked at a pizza place. Us GenXers got away with a lot of stuff because we were pre-computerization.

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    3. Sharon*

      Right, but the family members should be including that income on their tax returns regardless of whether they received a tax form from the business. I don’t know anybody that wants to pay taxes on $ they didn’t receive.

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  8. Antilles*

    I believe it was just under the amount that would have been reported to the government on taxes (I think $10,000 is the threshold).
    Banks have their own reporting threshold of $10,000. The fact the check just so happened to dip barely under said threshold tells you all you need to know about the illegality of this move.
    I would also note that while this slipped by “15+ years ago”, modern banking/accounting software analyzes patterns enough that even though your $9,900 deposit didn’t technically exceed that automatic $10k reporting threshold, it still would have gotten flagged as unusual account activity.

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    2. C*

      And deliberately depositing amounts just under the threshold so you don’t trigger an automatic check is also illegal – it’s called restructuring. (It’s not illegal if it just happens, of course.)

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  9. Sparkles McFadden*

    Yes, your mom committed tax fraud. You, however, did nothing wrong and it’s very impressive that you pushed back on this.

    I’m hoping Alison’s answer and the comments will let you put this to rest.

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  10. Bossperson*

    Yeah, that’s not right.

    I have a small business and younger kids. I do pay my kids for work they do in the business but they don’t know about it yet. Right now they think they are just helping because it’s a business that helps pay for everything else for the family. I pay them $15/hr for the 8 hours a week they work (which is what I’d have to pay anybody else locally to do this specific job for the business).

    Honestly, I just pay from the business to their savings account I set up for them and then from there I put it all in a Roth IRA for them since it’s earned income and comes out to just under $6k a year. It’s one way I’m using being a business owner to build generational wealth.

    I haven’t told them about it yet but will within a couple years. Not because I want to be fraudulent but it’s just a little early to talk taxes/investments/compounding interest etc when they are currently stoked enough over their sub $10 a week allowance.

    Reply ↓
    3. BlueberryGirl*

      My parents did a similar thing for me- setting up a Roth IRA for me as a child using the Alaska PFD checks. I have been grateful for it ever since and it has been a wonderful gift to me. This is an amazing thing to for your kids.

      Reply ↓
  11. Angie S.*

    I would say this kind of activity is more common than some people may think.

    One of my friends way back when got into a fight with her parents after the parents refused to let her file her own tax return. It turned out that the parents’ restaurant “paid” my friend all those years a salary since she legally could have a job. my friend didn’t understand until we mentioned how she should file her own tax (being in the 20 and had her first real job blah blah blah). The parents asked their accountant to complete the friend’s tax return all those years and she didn’t understand what the heck was going on.

    I think my friend at that time was more angry that she didn’t really see a cent from all those paychecks than believing it was illegal.

    Reply ↓
    1. CzechMate*

      Oh god, yes. Same with opening accounts and credit cards in a child’s name. I had always been shocked by that episode of Criminal where the mom steals her own daughter’s identity…then I just found out that a good friend’s mom did EXACTLY the same thing.

      Reply ↓
      1. fhqwhgads*

        When I first read the letter, I was concerned OP’s mom might’ve done that too, but given the time lapse, I think they’d have found out by now.

        Reply ↓
      2. MigraineMonth*

        I have a friend whose mother has opened so many credit cards in her name. She eventually had to file a report with the police to get the information off her credit report.

        I have another friend whose parents just straight-up stole the money she earned from her jobs when she was a minor. And *then* they refused to help her pay for her college education when she was denied loans because their income was too high.

        Reply ↓
  12. Delta Delta*

    My husband’s grandparents (both dead over 20 years) owned a small business in the 50s-80s. Grandma never had a job and she never worked at the business. But, she was on the payroll for exactly the reasons Alison mentioned here. She also showed enough “work” to qualify for social security. I think this happened a lot back then. I mention it only because a) it was so long ago and b) they’re both long dead.

    Reply ↓
    1. Another Kristin*

      I know a couple who does this to this day – one is a high-earning self-employed consultant, the other is their spouse’s “bookkeeper”, earning a suspiciously high salary for what seems to be minimal to nonexistent work. It’s extremely common in family businesses.

      It’s…sort of not a bad idea for women who don’t work outside the home, because that way they are paying into government retirement schemes and don’t have to go to their husbands whenever they need money (because they get a paycheque!), but it is 100% tax fraud.

      Reply ↓
      1. Rocket Raccoon*

        Odd, my husband also owns/runs a business and we just file as joint owners. Why bother committing fraud when there’s a legal way to include both partners?

        Reply ↓
        1. sole property*

          The business-owning spouse may want to maintain the business as their separate property. I live in a community property state where this is very common- the non-business owning spouse is treated as an employee, often with no decision-making or check-signing ability, so the business remains the sole property of the other.

          Reply ↓
      2. Tasha*

        Just commenting to say the word “scheme” apparently doesn’t have the negative connotation in Australia and England that it does in the U.S.

        Reply ↓
    2. metoo*

      If she showed enough ‘work’ to qualify for SS then it that work was being reported and taxes paid. Like Allison says – if they are the only owners of the business they can pay someone not to work if they want. This instance actually sounds totally legit.

      Reply ↓
      1. Cj*

        yeah, I don’t think possible tax fraud is the worst issue here. she was probably hiding from the other shareholders that she was paying her kid for work she didn’t do, thereby stealing from the other owners.

        Reply ↓
    3. HannahS*

      Oddly enough, there was briefly a (deliberate) tax loophole created for doctors in Canada to incorporate their individual practices and do exactly that–so that you could income-split with your spouse or children and lower your taxes. It was a way for the federal government to quietly give doctors a raise without requiring the provinces to increase their healthcare spending. That loophole was eventually closed, and now if you’re paying your spouse or child they have to actually be working for you.

      Reply ↓
    4. Teapot Connoisseuse*

      When my husband was out of work for a while, someone suggested I “employ” him to bring down my tax liability. I pointed out that the tax authorities would probably be onto me like a shot if my income suddenly dropped by half while taking on another staff member.

      Reply ↓
  13. Saturday*

    Good for you, LW, for asking questions and for refusing to go along when things seemed fishy! That’s really hard to do at such a young age!

    Reply ↓
  14. I Count the Llamas*

    Assuming you are in the US, you might be able to verify that it actually happened by logging into your social security account. There’s an option to review your full earnings history. If your mom was running it through payroll (and not as say, a 1099 worker) then it’ll show there.

    Attaching the link in a comment below.

    Reply ↓
        1. Cj*

          And if you were paid as a 1099 contractor, and were actually sent a 1099, you would have owed self-employment taxes on it even if you were under 18, so you would have gotten a letter from the IRS. Unless of course she took it out of the mail before you ever saw it.

          Reply ↓
      1. Jessastory*

        yeah I was just going to suggest OP look at their social security account to make sure mom didn’t mess with her taxes at all.

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      2. knitcrazybooknut*

        Same. I always look at my past years and reminisce about the days I thought $10 an hour was a FORTUNE. Yes, am old.

        Reply ↓
    3. The Man, Becky Lynch*

      My bad for not skimming the comments prior to commenting just this. I’m glad the OP got this info to act on!

      Reply ↓
  15. Ama*

    I only avoided being drawn into a boss’s embezzlement scheme as a young 20 something admin because my CPA father had impressed upon me the importance of always checking with my finance office if I wasn’t sure what was allowed. (And because I was naive enough to believe my boss just didn’t know the rules, not that he was testing my ethical flexibility. That didn’t become clear until he got caught and fired.)

    I doubt I would have been suspicious or even thought to ask anyone else if my own parent had told me to do something and assured me it was fine.

    Reply ↓
    1. Observer*

      I doubt I would have been suspicious or even thought to ask anyone else if my own parent had told me to do something and assured me it was fine.

      Yeah. To me *this* is the really bad part of the story. Not that tax fraud is ok. But pulling this on *your kid*?! That’s just . . . no good words for that.

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    2. HA2*

      Ooh, is there an interesting story there? What did he ask you to do that led you to ask the finance office whether it was allowed, and how did they react?

      Reply ↓
      1. Ama*

        There were a lot of little tests but the biggest one was when a promotion that had been put in motion by my previous boss was denied (supposedly due to some union technicality, but it also conveniently meant I wouldn’t move to a level that would give me budget access so it’s possible new Boss didn’t argue against the technicality as hard as he could have) Boss offered to “make it up to me” by allowing me to charge my flight home for vacation to his company credit card. Which sounded very wrong to me, so I did some research with the finance office and it was very clear that personal travel expenses were not coverable under any circumstances. I thanked him for the offer but told him I didn’t see any way we could get it approved. That was probably three months before he got walked out of the office by security after an audit of his previous department turned up six figures’ worth of irregular expenses.

        When I was in high school my dad had coworkers who were fired due to falsifying an expense report — at the time he felt very bad for the junior coworker who had been persuaded to go along with a senior coworker’s scheme, but he used it as a lesson for me and my brothers why you should confirm with someone else if a senior coworker is telling you to do something that doesn’t sound right, especially if it involves company finances. That lesson literally saved my job.

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    3. OP*

      In all fairness, this parent was known for being sketchy. I had already seen some things that were black and white illegal so I had plenty of context to push back on this. If it had been the other parent I may have gone along with it more.

      Good for you for navigating your situation the way you did! You didn’t really (as far as I know) have any reason to doubt your boss so this to me is impressive.

      Reply ↓
  16. Phony Genius*

    If the OP had been an adult at the time it happened, are there any laws that would have required them to report this?

    Reply ↓
    1. Observer*

      Almost certainly not. There are very few situations where someone might be required to report illegal activity.

      Reply ↓
      1. Freya*

        Actually, in my state of Australia (New South Wales), if it’s something that could be carry penalties of 5 years jail or more (eg. rape, murder, child abuse, tax fraud) then concealing the crime (failing to report it to the police or other appropriate authority (eg the tax office for tax fraud) without reasonable excuse when you’ve got information that would be of material assistance to prosecuting the crime) is a crime. A lesser crime, but still a crime.

        Reply ↓
    3. Strive to Excel*

      Unlikely.

      There are people who are obligated to report specific lawbreaking behaviours, but if you’re one of them you know it. In the US it’s often done through professional licenses; ie, doctors & lawyers are obligated to do specific things or risk losing their license. But even there, you can run into a situation where you don’t have anyone to report *to*, or nowhere to report to safely.

      Reply ↓
  17. BigLawEx*

    LW if you’re in the US have you logged in and checked your Social Security ‘credits.’ There would be a list of all money ‘earned’ from the first year your number was used. Also, did you ever receive tax notices. My son worked in TV when he was a small child and there was no dearth of notices from the IRS regarding his obligations. It was also flagged, I believe, because he was a minor.

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  18. GreenDoor*

    Just reiterating that this isn’t your fault. My grandmother often had me “sign” things for her. I remember when I was very young (not quite a teen) she’d even have me sign in the names of aunts and uncles. When you love and trust you adults, and you’re still a kid, you don’t even realize they’re involving you in something bad.

    Have you run a credit check on yourself lately? I wouldn’t put it past your mom to have opened credit cards or taken loans under your Social Security number or other government ID if you’re not in the States. Do check!

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  19. The Man, Becky Lynch*

    You can check your social-security transcripts to see if you have earned income reported from your youth. That would tell you if Mommy Dearest was paying Federal Taxes on those earnings or not!

    Reply ↓
  20. CzechMate*

    I feel so bad that this has been eating at you, OP. As everyone else has said, you didn’t do anything wrong. Honestly, finding a way to avoid signing boss/mom’s sketchy shows that you had a lot of foresight and bravery at a pretty young age–there are plenty of full-grown adults I’ve met who would have just gone along with it.

    Reply ↓
  21. readerreader*

    This post reminded me of something I had long forgotten about. My parents used to put money in my name so the taxes would be lower. Just before I was 18 I was asked to sign it back to them, which I did and never thought a thing about. I just looked this up and it appears illegal. This was all done in the early 80’s so water under the bridge.

    More recently, I know someone whose mother opened credit cards in their name and ran up quite the bill. They are unwilling to prosecute so stuck with paying them off.

    Reply ↓
    1. SMP*

      This happened to my husband. It destroyed his credit because he had no idea that she had done it. His mom died a few years later and we paid off the bill. It was pretty awful but they had some mental struggles and weren’t making good decisions at that point.

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  22. Commenter*

    it would be pretty easy to find out. Create an online account on the social security website and see if you have earnings for those years.

    Reply ↓
  23. OP*

    Thank you, Alison! And thanks to the commentariat as well for the very thoughtful and compassionate responses. I suspect there were no credit cards or loans taken out in my name, however, several people have given really helpful information that I am going to look into. It never hurts to check and to prevent future incidents.

    I’m also so sorry for the other people sharing their stories that have gone through similar (or worse) situations. Unfortunately, I’m sure this isn’t all that uncommon.

    This is such a great community though.

    Reply ↓
  25. Sans Serif*

    You can find out whether it was reported as your income. Go to the Social Security website and open up an account. You can do this way before retirement age, just to look at your past income records and see what you might get in add someday. Google “SS login”.

    Reply ↓
  26. Freya*

    Fun fact: in Australia, there is no statute of limitations on tax fraud. The Australian Tax Office (ATO) won’t generally audit further back than 4 years, but if they have reason to suspect tax fraud then they can go back to the beginning of time if they want to.

    Reply ↓
    1. Freya*

      Aaaaand I just checked, and there’s basically no statute of limitation here on anything that’s a “serious indictable offence” ie has a maximum penalty of five or more years jail time. Less than that, and it depends which state of Australia you’re in.

      Reply ↓

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