Legal Question in Business Law in Minnesota

Hiring a freelancer with income restrictions
I own a business and hire freelancers. One of my prospective freelancers is on Medicare and cannot receive income because it will affect her health benefits. She lives with her mother and the two share a checking account. She has asked me if it would be possible for her to work for me, but for me to make checks (also 1099 forms, etc.) out to her mother so that the income does not go down on paper as ''hers.'' I have the feeling there is something wrong with this situation but I would like to know the true seriousness of it and whether doing this would put me in a very bad situation. I would like to help her, and the money all goes to the same place, but I am pretty sure this is not ethical. Would really appreciate a legal description of why or why not so that I can explain it to her. Thank you for any advice.

Edited to add that the writer says her mother could help her with the work to help justify the payments going to the mother. Don't know if this would actually occur or not.

Asked on 2/18/08, 8:36 pm

2 Answers from Attorneys

David Anderson Anderson Business Law LLC

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Re: Hiring a freelancer with income restrictions

This is Medicare fraud. It is a Federal crime, and since you have been advised of the scheme in advance, you would be prosecuted as a primary actor in the crime.

You should decline this arrangement, pay only the person doing the work, and carefully document all compensation paid out, including providing 1099's at the end of the year.

Answered on 2/18/08, 9:18 pm

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