My cousin embezzeled a significant amount of money from her employer over the past 2 years. She was due a W2 for 2005 however she received a 1099 for all the monies she stole the past 2 years. This has not gone to court as of yet and I beleive in our country you are inocent until proven guilty. How can she be given a 1099 instead of a w2 when she was employeed by the corporation for 12 years? Also is there any statue of limitations on embezzeling? So you know she know she was wrong she's selling her house to pay back the money. She knows more than likely she will do jail time. I just can't see how she could possibly get a 1099 maybe I'm missing something.

Actually, she should have received a 1099 for every year she embezzled, not just last year.

Embezzled income is taxable to the person who does the embezzling, in accordance with a number of IRS revenue rulings. Your cousin will need to claim the amount that she had embezzled in her gross income in the year of the embezzlement and pay any taxes due on it. Because the embezzlement constitutes income to her, her employer is required by law to report it to the IRS and could face penalties for not doing so. That's why she received a 1099. It has nothing whatsoever to do with finding her guilty before her trial.

Proper reporting of the embezzled income to the IRS also provides the company with the necessary documentation in needs to deduct this business loss. Because her employer has suffered a business loss due to her behavior, it is entitled to take whatever deductions are available to it to offset that loss.

If she had wages and salary last year as well, then she should have received a W-2. If she hasn't, she should contact the IRS help line at (800) 829-1040. The IRS will notify the employer and will send her a form 4852 to complete in case she doesn't get her W-2.

Your cousin faces some serious tax issues in addition to the criminal issues.