Discussion:Form 941 Quarterly Tax Withheld

Questions

1. Is the employer liable for all the taxes due for each employee? 2. If so, can the employer deduct from the employee paycheck money owed for 2005 in 2006? 3.

Presumably, 941's have been filed showing liabilities and the employer billed. If not, IRS is unaware of the unpaid taxes.

Now, if the ss tax were w/h and the p/r taxes were not remitted, then I agree, it is not between the IRS and the employee but the question stated "If the employer did not withhold FICA and Federal Taxes from the employees" and so we go down a much different path to arrive at a very nasty conclusion.

My questions are:

1. Do I HAVE TO pay this amount to my employer? According to the posts above, it seems that it was the employer's responsibility to deduct these taxes from my paycheck. 2. I need a lawyer in Chicago area to talk to about this, any recommendations?

Thanks,

Ucan

As far as an attorney goes, perhaps JR can recommend one, if he reads this post.

What I want to know is which party is legally liable for FICA in the end of the day? My employer (as they are required to withold my and their portion of FICA and Medicare) or myself (as I'm supposed to check my paycheck each month and verify my employer is witholding my portion of FICA and Medicare)?

Thank you,

Based on that information, it would appear that the employer is legally required to pay the FICA.

Thanks,

Kate

employer's attention.

I also had a client in this situation. The treasurer asked me prepare an analysis of the unpaid taxes, potential penalties and interest. The employee had moved back to her home country just before the error was discovered. In the end, my client decided to keep the documentation in case the IRS ever questioned it. They have not.

I have a question on similar lines. I just noticed that my SSN and Med taxes are not withheld due to a mistake by my employer. Now i am about to leave the company in about a months time. Can you tell me what happens if in future sometime there is a tax investigation and this problem is discovered. Will i be held responsible.. or in other words what will be the implications on my side..? I want to maintain a clean history and am not sure how can i rectify this problem given the fact that i am going to leave my current company soon. Any help related to this will be helpful.

thanks,

I am brand new to this forum, but I beleive it very much pertains to my situation and I would REALLY appreciate any quick insight. First off, I am not an accountant, but rather an salesman employee (I receive a W2 which includes a salary and all commissions earned). I've been at this company for just about 5 years and in that time have generated a lot of business, but due to overall "hard times" with the rest of the company, I was very generous in letting them pay me these earned monies. But in 2006 they finally caught me up to date resulting in my w2 being over $400k. I finally received a breakdown of the many jobs that I sold that made up this figure and noticed a "FICA Match" dollar amount under each commission payment. For instance, there was a commission payment listed at $68k and a "fica match" amount of ($5,250). So I went back to look at my pay stub and saw the base $68k amount with the fica, ss, etc...all deducted off just like every other check is. So I went and asked our accountant about why if my 7.5% of fica was taken off of my paycheck, then why is there an identical "fica match" being deducted from the listing of commissions owed to me? She said that the owners changed the rule and made me responsible for their portion of fica - meaning I'm paying a full 15%. Is this at all legal considering I am clearly and employee and not contracted employee and because they "changed rules" from how they paid me in the past with no verbal or written notification? Sorry for this long winded issue, but I really feel they are trying to pull one over on me. I am employed in CT and our company (which is an LLC)has fewer than 10 employees if this info helps. Thank you so much for any insight you can offer!!!!

They cannot legally do that. You are an employee and the company must meet the other half of FICA (7.65%). My suggestion is to contact the Department of Labor.

Best wishes.

Dani

Thank you both so much for your rapid reply. I truly appreciate you both sharing your knowledge about my situation. You are both a huge asset to this site! Thanks again and I'll let you know how this plays out. McGill811

1) How does this affect his future Medicare if they don't pay their portion; 2) If you want to keep a good relationship with employer, how can you get them to use a W-4 and pay FICA on his behalf; 3) If my husband has not filed Sched SE in the past but is this year, will that come back to bite us and we will owe years of FICA?

Thanks,

If they are unwilling to listen and do not appreciate the information, then... he could notify various authorities, stay employed there & hope for the best. Or, find another job & notify the authorities, or just move on.

If he is in sales, ther is a chance that he could be considered a statutory employee, and the rules are different. Employer pays their part of FICA, but employee is resposible for their own part (withheld from their commissions/pay)The employer does not withhold income taxes, the statutory employee is responsible for calculating this on their own. In this case, at this point of transition, the employer my simply not understand these rules.

Good luck.

I own an S Corp and prepare quarterly taxes myself. I take portion of corp income as salary and portion as distribution. Is it necessary to make quarterly deposit on distribution? Or can I pay tax on distribution at end of the year and only pay payroll taxes quarterly?

But, JR is correct that you should consider consulting a tax professional to avoid falling into one of the many traps for the unwary.

You are free to pay them at year end if they're in a bonus salary so that they're withheld. Otherwise you'd have to make quarterly estimated payments.

I will continue making estimated tax payments equitably over the year. Last quarter of last year I had major expenses resulting in refund so I thought there may be some other way.

In 2004, I began to work for a woman who was in the process of getting her start-up funded. I agreed to contract work and accept payment after funding. It succeeded in a first round of funding at the end of 2004. I was paid for my work and hired on as a f/t employee. Six weeks into working as an employee, the woman asked that I revert to being a contractor. The incentive, she said, was I would be paid for each hour I worked... thus could potentially make a lot more. I agreed, but realized it was a bad deal. She wouldn't return me to being an employee, but I felt I had no recourse. I continue my work through 2006.

In early 2006, she got more and more behind in paying me. I complained. She fessed up she was almost out of cash. She wanted me to continue working for IOUs. I said "No thanks" and stopped doing any work for her. I looked into my options and decided my best recourse was to file an SS-8 to get clear determination I should have been an employee. I should mentioned that I fulfilled my duty at all times to the IRS. I made quarterly estimated tax payments as required. I filed my 2005 return (the money I earned in 2004 was paid in 2005, so 2005 was the first year I filed with contractor wages) according to the instructions sent to me by the IRS after filing the SS-8. I considered the money I made up to being hired full-time would be considered bonafide contractor wages. On this money, I paid my federal/state taxes, as well as both employee and SE FICA tax. On the money I made after being hired as a f/t employee (but subsequently reverted to contractor), I paid my federal/state taxes as one normally calculates and my employee FICA by listing the money I believed should have been paid as a employee on the "Tips not reported by Employer" form. (This as per IRS instructions).

It took 10 months, but the IRS finally delivered its SS-8 determination: I am considered an employee for all work performed for this company. This includes the work I did part time in the beginning.

Naturally, this will require refiling my taxes for 2005 (and 2006 as well). After filing my 2005 taxes as noted above, the company sent me revised tax documents as a result of my SS-8 filing. The previously reported 1099 income resulted in corrected 1099 statements showing $0 income. Instead, my income was reported on a new W2 showing exactly the same amounts as earned wages. The strange part is, there we amounts listed as being paid for federal, state and FICA... but nowhere near the amount eventually due. The wages in question here exceed $100K in total, and the amounts listed as paid out for federal and FICA were on the order of $1000 and the amount of the state tax paid on the order of several hundred dollars.

Now I'm at the stage where I'm trying to amend my return. I removed the 1099 information from my return (prepared in TurboTax) and added the new W2. It refigures my taxes showing me with a huge refund. I see the reason why: the amount I previously filed what I believed would be contractor wages had the amounts calculated against it for employee FICA and SE FICA reversed... I removed the form "Tips not on wages not reported to employer", which generated the employee FICA previously. I believe this is correct, since 100% of my wages are properly identified on my new W2-- no longer are there any unreported wages.

So it seems that TurboTax assumes if a W2 is issued, then the employer has properly calculated the FICA wages owed. If I change the FICA amount withheld on the TurboTax W2, it has no effect on the refund. That considered, I don't know how to change my 2005 return to report the "underwithheld" FICA. It seems that if I submit my return only with the described changes... that is, removal of 1099 (and associated "Tips on Wages Not Reported to Employer" and addition of W2, I'll be returned the FICA taxes I previously declared. If that actually happens (i.e. it doesn't get kicked out by the IRS for whatever reason), that'll effectively recreate the employee FICA liability for that year... similar to the cases discussed in this thread. Since this company was deemed to be my employer, they had the obligation to withhold my FICA taxes.

Does anyone have any differing opinion on this? (i.e. if I'm applying improper logic to my amended 2005 return, how SHOULD I amend it?)

Thanks for any advice... Michael

You probably aren't going to like to hear this but....

You are in over your head. Get to a tax professional, please. If you had read this, you will understand why I say it:

The Purpose and Use of Tax Almanac

Pay close attention to paragraphs 3 & 4.

From what you write, I can tell the FICA amounts are automatically not correct without going to my calculator. They aren't even close. If you employer figured them properly, their share is on your first $90K in wages for 2005 and $94,200 for 2006. That makes the effective FICA and Medicare taxes on your W-2 the following:

2005: FICA - $5.580 2006: FICA - $5,840

If your employer figured these amounts properly, these amounts above would be reflected on your W-2. Without looking at the W-2, I won't even hazard a guess as to why.

This is why you need to see someone who is a tax professional to help you through this minefield. Not so much for the employer mistakes (which could have an impact), but you are amending a return that has some issues that you are not familiar with that a good tax pro is and can walk you through this situation.

You seem like a smart guy. I can tell from your writing. Heck, you gave us more information than most people.

Don't be penny wise and pound foolish.

Tom

W-2 S/B:

Box 1: 3,606.28 Box 2: 0 Box 3: 3,350.00 Box 4. 207.70 Box 5. 3,350.00 Box 6. 48.58

And for WA State Employment Security GW S/B $3,606.28.

Correct?