Author Topic: Work forgot to withhold, am I just SOL?  (Read 1699 times)

TheFixer

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Work forgot to withhold, am I just SOL?
« on: July 18, 2017, 08:38:11 AM »
Weird tax question of the day.
My DW works as a paid, part-time hourly employee of a large non-profit entity (hereafter known as 'the company'). She has worked there in various PT positions for 11 years. Currently averaging 25-30hrs/week. It's a good PT job because: not walmart, good pay, 401k w/ generous match, flexible schedule, no profit motive...

In August 2016 she received notice from HR that her witholding was changing to include 2% city income tax. Oh, okay, we didn't know that was a thing, since we live in an unincorporated exurb. That was the last we heard of that until this week (july 2017). She has been informed by HR that due to their mistake (forgetting to withhold for the last 11 years) that she owes 4 years of back city tax, probably $1900-2000. HR says they take complete responsibility for this mistake and therefore will pay the tax bill & penalties, then take the overdue tax out of DW paycheck for the next several months. this is a $400/semimonthly size paycheck, so getting $2000 out of it is gonna be challenging.

HR uses the phrase "we take complete responsibility", but since nobody is getting fired (11 years without withholding!) and DW is paying the tax, it seems that they do not understand what taking responsibility actually entails.

Oh, what the heck, here's the redacted internal memo:
<<It recently came to our attention that city tax was not withheld from your pay for years 2014, 2015, and part of 2016. The approximate overdue tax is $1,876. There may be a penalty added to this amount, which the company will pay.

This was our error & we take complete responsibility for this.  The Company will pay the total taxes, plus any penalties & interest.  The overdue tax will be deducted from your pay to repay the Company in an amount that will not cause you any financial difficulty.>>

Whaddya all think, suck it up & let the company make DW pay? This would allow her to keep working there & stashing 401k funds.
Or say,"nope, not paying 4 years of back taxes that you morons forgot to withhold. HR should pay (literally) for their mistake". Which would at best create a hostile work environment, at worst get her fired.
Or quit immediately, so they can't take the money out of her future paychecks.



CareCPA

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Re: Work forgot to withhold, am I just SOL?
« Reply #1 on: July 18, 2017, 09:02:45 AM »
I would say it's not unreasonable for them to take the tax out of future paychecks, since it's taxes you should have been paying anyway (even if you didn't know about them).
I think the company should eat the penalties and interest.
Always happy to help with tax or accounting questions - feel free to private message me.

I am a licensed CPA in Pennsylvania. However, any tax advice I give should be considered general information and not used in the avoidance of tax. There is most likely information about your situation that I do not know, and thus you should do your own additional research.

Yes, in case it confuses you, I did change my forum name.

geekette

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Re: Work forgot to withhold, am I just SOL?
« Reply #2 on: July 18, 2017, 09:12:01 AM »
Agreed.  It sucks, but if it's taxes you owe, you should pay them.  Interest and penalties are on them.

MRL

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Re: Work forgot to withhold, am I just SOL?
« Reply #3 on: July 18, 2017, 10:25:03 AM »
I would be surprised if leaving the job just makes the problem go away

TheFixer

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Re: Work forgot to withhold, am I just SOL?
« Reply #4 on: July 18, 2017, 10:46:58 AM »
Thanks for the insight & good advice all. 
We're cheesed off that this has been ignored for 11months, and today "it has come to our attention"?
And the bit about the incompetent (No, seriously, there have been many other $$ issues) payroll manager 'taking complete responsibility'.
Grrr, just a sh!tty situation being clumsily handled.

I guess that's why we're headed for FIRE.



BrandNewPapa

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Re: Work forgot to withhold, am I just SOL?
« Reply #5 on: July 18, 2017, 11:06:52 AM »
Its crazy that it happened, but the employee (your wife) also has a responsibility to ensure the taxes are paid in some way or shape. Check your pay stubs and make sure everything looks right, at least once a month.

Ignorance of the law is not an excuse. I'm surprised the township never contacted you to tell you about your back taxes. I think you're lucky they are even offering to pay the penalties.

I used to live in a township that didn't work with any area companies to withhold tax. My first year living there I was hit with an "oh shit" moment when my neighbor told me we had to submit our taxes next week. $600 I wasn't planning on. Good thing I wasn't making more money or living in a higher taxed area at the time.

MDM

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Re: Work forgot to withhold, am I just SOL?
« Reply #6 on: July 18, 2017, 11:35:10 AM »
HR uses the phrase "we take complete responsibility", but since nobody is getting fired (11 years without withholding!) and DW is paying the tax, it seems that they do not understand what taking responsibility actually entails.
Its crazy that it happened, but the employee (your wife) also has a responsibility to ensure the taxes are paid in some way or shape.
+1 to BrandNewPapa's perspective.

Filing and paying taxes is your wife's responsibility, not her employers.  Seems you doth protest too much on this one. 

TheFixer

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Re: Work forgot to withhold, am I just SOL?
« Reply #7 on: July 18, 2017, 02:08:54 PM »
Yep, we found out about this yesterday afternoon and it was quite the (unpleasant) surprise. We'll pay the money and be happy we don't have to pay the previous 7 years.



Zamboni

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Re: Work forgot to withhold, am I just SOL?
« Reply #8 on: July 18, 2017, 02:19:51 PM »
I continue to be amazed at how many inept or incompetent people (payroll manager) manage to keep their jobs for years and years even after everyone around them knows they are pretty worthless. Better job security for us, I guess.

jwright

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Re: Work forgot to withhold, am I just SOL?
« Reply #9 on: July 19, 2017, 08:35:07 AM »
You are filing taxes in your social security number, so the municipality is going to come after you for the balance due at some point.  Better to take the deal of paying over time and have the company pay penalties and interest.

Clever Name

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Re: Work forgot to withhold, am I just SOL?
« Reply #10 on: August 03, 2017, 07:21:20 AM »
Holy cow, I didn't even know cities *could* charge income tax. Is this in the US?

terran

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Re: Work forgot to withhold, am I just SOL?
« Reply #11 on: August 03, 2017, 07:41:18 AM »
Holy cow, I didn't even know cities *could* charge income tax. Is this in the US?

Given the OP's location it would appear that he/she lives somewhere in the middle of the US, so yes. I know NYC and Philadelphia collect income taxes at the city level.

BrandNewPapa

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Re: Work forgot to withhold, am I just SOL?
« Reply #12 on: August 03, 2017, 07:53:58 AM »
Holy cow, I didn't even know cities *could* charge income tax. Is this in the US?

I've lived in half a dozen+ different cities/townships in the US. All of them had an income tax.

Clever Name

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Re: Work forgot to withhold, am I just SOL?
« Reply #13 on: August 03, 2017, 08:14:37 AM »
Holy cow, I didn't even know cities *could* charge income tax. Is this in the US?

I've lived in half a dozen+ different cities/townships in the US. All of them had an income tax.

Really? That's so weird. I've lived in the US my whole life and literally never heard of that. Every city I've lived in has gotten their revenue entirely from property taxes.

CareCPA

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Re: Work forgot to withhold, am I just SOL?
« Reply #14 on: August 03, 2017, 01:40:08 PM »
Holy cow, I didn't even know cities *could* charge income tax. Is this in the US?

I've lived in half a dozen+ different cities/townships in the US. All of them had an income tax.

Really? That's so weird. I've lived in the US my whole life and literally never heard of that. Every city I've lived in has gotten their revenue entirely from property taxes.
In PA, your local tax varies depending on the school district you live in (in addition to property taxes).
Always happy to help with tax or accounting questions - feel free to private message me.

I am a licensed CPA in Pennsylvania. However, any tax advice I give should be considered general information and not used in the avoidance of tax. There is most likely information about your situation that I do not know, and thus you should do your own additional research.

Yes, in case it confuses you, I did change my forum name.

Psychstache

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Re: Work forgot to withhold, am I just SOL?
« Reply #15 on: August 03, 2017, 01:47:51 PM »
Holy cow, I didn't even know cities *could* charge income tax. Is this in the US?

I've lived in half a dozen+ different cities/townships in the US. All of them had an income tax.

Really? That's so weird. I've lived in the US my whole life and literally never heard of that. Every city I've lived in has gotten their revenue entirely from property taxes.

I thought it was weird bc of the OPs location. I knew some major cities like NYC had income taxes, but I assumed my experience (cities only collecting revenue via sales and property taxes) was the norm for most US cities.

MDM

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Re: Work forgot to withhold, am I just SOL?
« Reply #16 on: August 03, 2017, 01:50:57 PM »
I thought it was weird bc of the OPs location. I knew some major cities like NYC had income taxes, but I assumed my experience (cities only collecting revenue via sales and property taxes) was the norm for most US cities.
Most U.S. cities and counties do not impose a local income tax, but they are imposed by 4,943 jurisdictions in 17 states - at least as of six years ago.

Hargrove

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Re: Work forgot to withhold, am I just SOL?
« Reply #17 on: August 06, 2017, 12:13:24 PM »
Wow. I guess you got a deal, ultimately, but I would be very inquisitive about an "amount that won't cause you financial difficulty."

You screwed up for a decade, AR Person, and now I'm supposed to trust you to make financial judgements on my behalf? No chance.

It's not that I would try to get the company to pay the whole tax bill, but I would certainly demand that no repayment plan be put in place without my involvement in creating it.