I own a small collectibles business and had a local neighbor kid helping out with sorting etc. He made about 550 bucks over last month or so helping out with things like cleaning and sorting, and I never had him sign anything about being 1099 (i know he hasnt reached the 600 level etc). Long story short he stole 9000 dollars worth of cash and merch and was seen doing so. I called cops they have done nothing. He has sent me messages stating he is suing me and going to IRS for paying him cash under the table and under minimum wage! What can be done, what do I do at this point as im having major panic about it all.

Employment law varies by jurisdiction but I based on the rules here you have nothing to worry about. You should likely include what state you are in since then someone from that state can give you information about your specific laws.

With respect to the stuff he stole I am not surprised you are getting nowhere with the police. What kind of family is he from? Assuming he isn't the son of trash I'd call his parents and explain that their son stole from you and that you'd like to give him the opportunity to return the stuff or for them to make restitution before going to the police. I'd also explain that if restitution is not made that you'll sue them. Again knowing where you live would be useful since in some jurisdictions parent's are civilly liable for minor's behaviour.

If the family is not trash they will just give you your money. If not then you need to follow though. Sueing them is easy enough as the amount should be less than the limit in small claims. Getting the police to do something might require making a fuss. You either have to hit on the right officer who is going to care enough to do his job or you'll have to make it clear that the hassle you'll create from them not doing their job is more trouble than just doing what they are supposed to.

Indiana

He is basically homeless living in uncles basement is in 20s, never held a job, doesnt have a car...I was trying to help the kid but he screwed me obviously. He has since spent the cash and is broke now he claims. The kid literally has 4 shirts to his name so not sure how sueing him will help but the fact that cops wont even contact me again blows my mind. He is blasting us on facebook about us committing insurance fraud (not even turning the loss in). The kid is a pos just dont want the IRS to come calling or anything else to come of this. At this point I just want to take my lump, learn my lesson, and move on.

I thought this was a minor -- 20 year old isn't what I picture as a kid.

Given what you describe you are going to have trouble recovering. I would still sue even though the judgement will be useless just to have the judgement against him. It will make it just a little harder for him to ever turn his life around.

I don't bother with the police because they are useless but I would suggest you really push it and basically hound them until they do something. If the front-line officers won't do anything then go over them to the next level -- I find this usually works when dealing with large organizations. If it gets to the point where you get frustrated reach out to local media -- obviously not the Chicago Tribune but something small and local. Reach out to your city councilor -- they also tend to be lazy and do nothing but worth a shot.

Appreciate the advice, should I reach out to IRS or wage and labor preemptively?

For 550 your exposure is super low (assuming all your other ducks are in a row - no hidden "cash sales", all employees on payroll or actually are independent)

1. The IRS probably won't even give a **** for 550
2. The er portion of se here if they gross it up is like 45, so 2x is 90. Add in futa and state ui and it's like 150.
You need to prove he is independent - he sets schedule to a certain extent, does it how he wants without your supervision, etc

I wouldn't even give this threat a second thought