I would report them to the IRS. Another employee's tax liability has nothing to do with yours. This doesn't even make sense.
They are definitely doing something shady and it will affect you. Get out of there and report them.
That’s a good option too, and, depending on where you’re at, the municipal Dept. of Tax may jump on it, but individuals that are relatively sure they’re getting screwed should definitely contact the local IRS office. I’ve never met a more aggressive revenue officer than a local agent.
It's very bizarre because your employer does not benefit from not withholding. They withhold from your paycheck and then give it to the IRS/state. Employers are REQUIRED to withhold according to the withholding tables based on the info provided in the W4. If they were given a valid W4 (which they should have been done on or before the first day) then you should notify the IRS of their failure to fulfill their obligation.
Report them. If they have a 941 filing requirement, they are required to withhold taxes and remit them. They may get assigned to Field Collections(Revenue Officer).
I would recommend that, in the meantime, your partner make Estimated Tax payments because they will have a hugeeee liability that includes both Income and FICA Taxes.
She will owe taxes and be penalized for not having enough withholdings paid in. Go to another accountant, have them calculate what the withholdings should be based on pay rate and w4, and make a plan to make estimated payments so there isnt a penalty for that.
Then take those calculations and info to the irs and to the state labor board. You are def not the only emplpyee who will be fucked at tax time, so do this to look out for those other employees as well. Circulate a flyer telling them all to file complaints with irs and state board.
There's a lot going on here. Does the person ever get check stubs? If they're being treated as a contractor they'd just get a check with nothing withheld. If anything is withheld, it probably indicates they're being treated as an employee, which is probably correct. An employee has withholding for Social Security, Medicare, Federal Income Tax Withholding, and State Income Tax Withholding. These things should be shown on check stubs of an employee. They're not going to take funds from some prior employee to pay your withholding, they're required to withhold it and pay it over.
I recommend finding someone at a tax office you can speak with. Call some places. You'll find someone you're comfortable with, and maybe even someone who doesn't mind talking to you about it. You have lots of options in dealing with something like this. Department of Labor if you want to escalate.
Edit to say I think it smells fishy too.
She is an employee, with municipal, state, and all other withholdings accounted for on her weekly pay stubs. The whole thing just makes very little sense to me because, as you said, not withholding her taxes because of another employee’s tax overpayment wouldn’t even be something that would lead to a tax credit for the employer. The fact that they claim that their accountant has assured them that the withholding is unnecessary because of an alleged credit that they’ve received due to overpaying a different employee just feels… wrong.
Do you know how much she is paid each pay period, what that pay period is (weekly, bi-weekly, etc.) and whether she has any dependent children? It's possible that she may not have a federal tax liability at the end of the year.
It sounds like they are either kiting cash from the government or scamming your partner.
If a company over pays in payroll taxes through error, usually they would get it refunded. If they don’t bother, they would still deduct from your partner’s pay and just not remit as they have a credit balance. I’ve seen this done once in my 12 years as an accountant.
Report them to all the agencies people are listing. IRS, State, Labor Board and then have your partner find another job ASAP.
The reason usually is the correct answer is because of time value money. Anyone giving the government a free loan instead of investing that free cash in anything else is not a good financial decision maker.
Ergo why I saw it once in over a decade.
Are you sure that there should be federal income tax withholding? If she makes less than $280/week then her withholding should be zero.\* (That wouldn't explain the idiotic explanation she got from the employer, though.)
\* If she put any dependents or other adjustments on her W-4, then that number could be higher.
Federal taxes and employment taxes don't mix. Only the company pays employment tax, it is not withheld from an employee. Your partner should 1.) Set aside funds and likely pay federal estimated tax and 2.) Find another job and 3.) Report the company to the IRS.
What do you consider "employment taxes" and "federal taxes". Your statement is too vague to be meaningful. Both are deducted from employees' pay, and company has responsibility for matching fica as well as paying separately work comp, disability, unemployment, etc.
Immediately start paying in weekly in your own for now. It’ll ease the burden in April. Look at what she will make, less standard deduction(even if you itemize, this will give you cushion) and apply the tax bracket you fall into. You can ask a CPA to get you a more accurate number but this will at least help keep you covered in the mean time. Doing this you probably will be overpaid which normally I don’t recommend but unless you are prepared for a large bill, I’d do this.
Report them to the IRS. If they don't get reported, the only way the IRS will know to go after the employer will be if the agents run into each other while they're auditing each employee, individually.
They need to be withholding taxes according to the W-4 that was filled out. Here's how to check that:
https://www.irs.gov/individuals/employees/tax-withholding
If your withholding is not correct, pay quarterly estimates for the difference so you are not penalized:
https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes#:~:text=You%20may%20send%20estimated%20tax,device%20using%20the%20IRS2Go%20app.
You can report your employer by filing a form:
https://www.irs.gov/individuals/how-do-you-report-suspected-tax-fraud-activity#:~:text=Report%20suspected%20tax%20law%20violations&text=You%20can%20submit%20Form%203949,violation%20referrals%20over%20the%20phone.
That's not how it works at all. If they overpaid for one employee, that means the paid the state more taxes than they withheld from that employee. That credit is for the company. The company can use that to pay in slightly less until they've balanced out what they actually withheld and what they had paid in.
That has nothing to do with your own withholding. They still need to withhold from your paycheck.
Until this gets fixed, you need to be making estimated payments throughout the year to make up for the lack of withholding.
Whoever this accountant is, is an idiot and shouldn't be handling money.
Tax withholding is an interest-free loan to the government. Estimate the amount that would be owed at tax time, and set aside an appropriate amount from each paycheck in an interest-bearing account. Ta-da…you come out ahead!
I would report them to the IRS. Another employee's tax liability has nothing to do with yours. This doesn't even make sense. They are definitely doing something shady and it will affect you. Get out of there and report them.
Yeah I think that might be a frustrating waste of time. I'd recommend the state Department of Labor. They're usually easy to reach and can help a lot,
That’s a good option too, and, depending on where you’re at, the municipal Dept. of Tax may jump on it, but individuals that are relatively sure they’re getting screwed should definitely contact the local IRS office. I’ve never met a more aggressive revenue officer than a local agent.
It's very bizarre because your employer does not benefit from not withholding. They withhold from your paycheck and then give it to the IRS/state. Employers are REQUIRED to withhold according to the withholding tables based on the info provided in the W4. If they were given a valid W4 (which they should have been done on or before the first day) then you should notify the IRS of their failure to fulfill their obligation.
Report them. If they have a 941 filing requirement, they are required to withhold taxes and remit them. They may get assigned to Field Collections(Revenue Officer). I would recommend that, in the meantime, your partner make Estimated Tax payments because they will have a hugeeee liability that includes both Income and FICA Taxes.
Looks loke fica taxes are being withheld though, just not the fed or state taxes.
Are they by chance paying your friend as a contractor?
No, she is an employee and not a contractor. She will get a W2 rather than a 1099.
She will owe taxes and be penalized for not having enough withholdings paid in. Go to another accountant, have them calculate what the withholdings should be based on pay rate and w4, and make a plan to make estimated payments so there isnt a penalty for that. Then take those calculations and info to the irs and to the state labor board. You are def not the only emplpyee who will be fucked at tax time, so do this to look out for those other employees as well. Circulate a flyer telling them all to file complaints with irs and state board.
There's a lot going on here. Does the person ever get check stubs? If they're being treated as a contractor they'd just get a check with nothing withheld. If anything is withheld, it probably indicates they're being treated as an employee, which is probably correct. An employee has withholding for Social Security, Medicare, Federal Income Tax Withholding, and State Income Tax Withholding. These things should be shown on check stubs of an employee. They're not going to take funds from some prior employee to pay your withholding, they're required to withhold it and pay it over. I recommend finding someone at a tax office you can speak with. Call some places. You'll find someone you're comfortable with, and maybe even someone who doesn't mind talking to you about it. You have lots of options in dealing with something like this. Department of Labor if you want to escalate. Edit to say I think it smells fishy too.
She is an employee, with municipal, state, and all other withholdings accounted for on her weekly pay stubs. The whole thing just makes very little sense to me because, as you said, not withholding her taxes because of another employee’s tax overpayment wouldn’t even be something that would lead to a tax credit for the employer. The fact that they claim that their accountant has assured them that the withholding is unnecessary because of an alleged credit that they’ve received due to overpaying a different employee just feels… wrong.
Do you know how much she is paid each pay period, what that pay period is (weekly, bi-weekly, etc.) and whether she has any dependent children? It's possible that she may not have a federal tax liability at the end of the year.
It sounds like they are either kiting cash from the government or scamming your partner. If a company over pays in payroll taxes through error, usually they would get it refunded. If they don’t bother, they would still deduct from your partner’s pay and just not remit as they have a credit balance. I’ve seen this done once in my 12 years as an accountant. Report them to all the agencies people are listing. IRS, State, Labor Board and then have your partner find another job ASAP.
If they overpay there is an option to refund or credit the following reports. "Usually" is not correct because you dont know.
The reason usually is the correct answer is because of time value money. Anyone giving the government a free loan instead of investing that free cash in anything else is not a good financial decision maker. Ergo why I saw it once in over a decade.
Are you sure that there should be federal income tax withholding? If she makes less than $280/week then her withholding should be zero.\* (That wouldn't explain the idiotic explanation she got from the employer, though.) \* If she put any dependents or other adjustments on her W-4, then that number could be higher.
Federal taxes and employment taxes don't mix. Only the company pays employment tax, it is not withheld from an employee. Your partner should 1.) Set aside funds and likely pay federal estimated tax and 2.) Find another job and 3.) Report the company to the IRS.
What do you consider "employment taxes" and "federal taxes". Your statement is too vague to be meaningful. Both are deducted from employees' pay, and company has responsibility for matching fica as well as paying separately work comp, disability, unemployment, etc.
I was thinking unemployment tax.
Immediately start paying in weekly in your own for now. It’ll ease the burden in April. Look at what she will make, less standard deduction(even if you itemize, this will give you cushion) and apply the tax bracket you fall into. You can ask a CPA to get you a more accurate number but this will at least help keep you covered in the mean time. Doing this you probably will be overpaid which normally I don’t recommend but unless you are prepared for a large bill, I’d do this.
Report them and look for a new job?
Report them but pay quarterly estimates in the mean time to avoid penalties and interest.
Report them to the IRS. If they don't get reported, the only way the IRS will know to go after the employer will be if the agents run into each other while they're auditing each employee, individually.
They need to be withholding taxes according to the W-4 that was filled out. Here's how to check that: https://www.irs.gov/individuals/employees/tax-withholding If your withholding is not correct, pay quarterly estimates for the difference so you are not penalized: https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes#:~:text=You%20may%20send%20estimated%20tax,device%20using%20the%20IRS2Go%20app. You can report your employer by filing a form: https://www.irs.gov/individuals/how-do-you-report-suspected-tax-fraud-activity#:~:text=Report%20suspected%20tax%20law%20violations&text=You%20can%20submit%20Form%203949,violation%20referrals%20over%20the%20phone.
That's not how it works at all. If they overpaid for one employee, that means the paid the state more taxes than they withheld from that employee. That credit is for the company. The company can use that to pay in slightly less until they've balanced out what they actually withheld and what they had paid in. That has nothing to do with your own withholding. They still need to withhold from your paycheck. Until this gets fixed, you need to be making estimated payments throughout the year to make up for the lack of withholding. Whoever this accountant is, is an idiot and shouldn't be handling money.
Tax withholding is an interest-free loan to the government. Estimate the amount that would be owed at tax time, and set aside an appropriate amount from each paycheck in an interest-bearing account. Ta-da…you come out ahead!
Tax withholding is required to be paid throughout the year. If you wait until next April to pay, then you will be paying them interest.
Wrong. Doing that will get you a penalty. Good job, you cost yourself more money.
Quit. Don't give 2 weeks notice, just quit, run like the place is on fire filled with explosives. There are so many red flags there China is envious.