A Product Of Fraudulent Taxes

(I work for a woman who has a fashion and jewelry import business, and she is trying to set up sales reps in other cities. She has just sent one rep a sales kit of some somewhat pricey jewelry, and the rep has ghosted us, stealing the jewelry. My boss’s solution for this?)

Boss: “Well… tax season is coming soon; maybe we’ll just 1099 her for it.”

Me: “What do you mean?”

Boss: “We can say the product was her payment and put it on her 1099! Then we’ll get it as a tax credit, and she’ll have to pay for it in her taxes.”

Me: “Uh…”

Boss: “We can even say the product was worth a lot more! Like, we can put [amount ten times the product’s value].”

(I’m starting to feel like this is sketchy.)

Me: “I don’t think we can. That’s fraud.”

Boss: “Who’s going to find out?”

Me: “[Rep] will report us to the IRS.”

Boss: *most arrogant tone possible* “How can she? She’s the one committing a crime!”

Me: “She has proof the items in her kit weren’t really worth that much. We sent out a packing list to all the reps, saying what products we sent them and what the value was.”

Boss: *deflated, so disappointed she doesn’t get to commit tax fraud* “Oh, yeah. Okay, so we can’t do that… but we can still put the value of products she got on her 1099 as compensation!”

Me: “I don’t think this is a good idea. Why don’t we just contact the police in her state and report that she committed theft?”

Boss: “That’s too hard.”

(Her accountant, who was probably also kind of shady, said that “payment in product” was a totally legit thing to put on a 1099, so as far as I know she went ahead with this scam. I don’t know; I quit — after tax season, to make sure she didn’t get mad at me and send me a bogus 1099 saying I had been “paid in product” ten times more than my actual salary — and got a job where the boss didn’t try to implicate me in fraud. My old boss is still in business, last I heard. I feel bad for her employees.)