Support NeoGAF

[sloppyjoe_gamer]

I live in the US. Someone i know worked for a school district and was getting paid monthly. Despite having claimed 0 / single on their W4, the district in some of the monthly paychecks took zero federal tax out.

Now its tax time and obviously there was not enough tax withheld so they owe like $600 to Federal. Are they still the ones who have to pay it despite the district's screw up, or if it can be shown that they didn't withhold like they were supposed to, that the IRS can instead contact them and get them to pay the owed tax?

 

[AzullAbaddon]

Regardless of if they pay per paycheck or once a year they have to pay.

 

[elementalnocturne]

I live in the US. Someone i know worked for a school district and was getting paid monthly. Despite having claimed 0 / single on their W4, the district in some of the monthly paychecks took zero federal tax out.

Now its tax time and obviously there was not enough tax withheld so they owe like $600 to Federal. Are they still the ones who have to pay it despite the district's screw up, or if it can be shown that they didn't withhold like they were supposed to, that the IRS can instead contact them and get them to pay the owed tax?

The taxpayer pays the owed tax either through tax withholding or at the end of the year. The employer does not pay the tax.

It means that the taxpayer received an additional $600 that should have been withheld on the paycheck. If it was withheld properly at the time they wouldn't have received the extra $600 and it would have gone directly to the IRS. They now need to pay the $600 to the IRS. Effectively it's just a difference in timing as to when the $600 is paid.

Source: I'm a CPA

 

[sloppyjoe_gamer]

Regardless of if they pay per paycheck or once a year they have to pay.

Maybe i didn't explain right....the employer didn't take federal tax out of all of the paychecks during 2023 even though they were supposed to, despite the person having a W4 onfile that they didn't change at all during 2023. So its the employers fault there is a tax withheld shortage, not the employee. So im asking if they prove to the IRS that the employer didnt do what they were supposed to (take out tax in every check), who has to pay the shortfall?

 

[SlimySnake]

Maybe i didn't explain right....the employer didn't take federal tax out of all of the paychecks during 2023 even though they were supposed to, despite the person having a W4 onfile that they didn't change at all during 2023. So its the employers fault there is a tax withheld shortage, not the employee.

you explained it correctly. doesnt matter who was at fault. you still have to pay what you owe.

at best, the IRS will give you some leeway on how you repay it. they might offer a payment plan.

 

[elementalnocturne]

Maybe i didn't explain right....the employer didn't take federal tax out of all of the paychecks during 2023 even though they were supposed to, despite the person having a W4 onfile that they didn't change at all during 2023. So its the employers fault there is a tax withheld shortage, not the employee. So im asking if they prove to the IRS that the employer didnt do what they were supposed to (take out tax in every check), who has to pay the shortfall?

The taxpayer's paycheck was $600 more since they didn't withhold it. They received an extra $600 that was meant to go to the IRS. The taxpayer paying the $600 to the IRS would be correcting the "error".

 

[sloppyjoe_gamer]

I appreciate the responses.....looks like they're screwed even though it wasn't their fault. What a fucked up system.

 

[elementalnocturne]

I appreciate the responses.....looks like they're screwed even though it wasn't their fault. What a fucked up system.

No one like being hit with a big bill all at once. It's a softer blow having the $600 taken out in smaller increments during the year in the form of a paycheck reduction.

Effectively they would still be left with the same amount of money at the end of the year if it had been done properly.

 

[sloppyjoe_gamer]

No one like being hit with a big bill all at once. It's a softer blow having the $600 taken out in smaller increments during the year in the form of a paycheck reduction.

Effectively they would still be left with the same amount of money at the end of the year if it had been done properly.

I agree totally, it just sucks that the dipshit employer didn't do what they were supposed to.

 

[FullMetalx117]

As the CPA said, taxes are still owed and the friend got an extra $600 sometime in the year. Now for the positive spin on this - from a time value of money perspective it is ALWAYS better to take the cash up front. Present value math says the friend actually made more money getting cash up front and is technically owing slightly less by paying lump sum when taxes are due in the end since IRS isn't adding some interest rate to taxes owed (if paid on time). Most people should not, if able, pay taxes throughout the year and just wait for the lump sum payment. Problem is that most people are irresponsible and just spend whatever they get. Good luck!

 

[jason10mm]

Read your paystubs folks....if they were not paying federal taxes were they paying SS or medicare?

Also, I don't think you can just lump sum all your taxes on April 15th anymore without taking a big penalty. I got an untaxed income stream now and I think after a year I need to make quarterly payments or risk a fine.

Source: I'm not a CPA but I am getting one now!

 

[AJUMP23]

Yes they have to pay. And they paid 0 and owe 600. This is a terrible job Pay.

I hope they withheld social security and state income and all the other.

also 0 is normally the exemptions. Not the amount they withhold. They need to talk to their hr.

 

[Vyse]

Checking your paystub is really important. I live in Nevada (no state income tax) and got promoted while working for a company based out of Pennsylvania. My paycheck got hit with PAINC. When I called HR, they said that was Pennsylvania state income tax. I got hundreds of dollars back when I reminded them I don’t live there.

 

[elementalnocturne]

Read your paystubs folks....if they were not paying federal taxes were they paying SS or medicare?

Also, I don't think you can just lump sum all your taxes on April 15th anymore without taking a big penalty. I got an untaxed income stream now and I think after a year I need to make quarterly payments or risk a fine.

Source: I'm not a CPA but I am getting one now!

Most likely the taxpayer in the original post had payroll taxes (SS and Medicare) taken out. It's not really possible to mess that up regardless of how the W-4 was initially filled out.

If you are self-employed you are required to make quarterly estimated payments (04/15, 06/15, 09/15, and 1/15) or you will be assessed a (small) penalty. Some clients are diligent about paying timely and some don't care and would rather have more cash now and and pay it all in a lump sum on April 15th.

If you are a W-2 employee this doesn't apply to you. Even if you have an issue with lower withholding you can just pay the difference by April 15th and not worry about penalties.

 

[jason10mm]

Most likely the taxpayer in the original post had payroll taxes (SS and Medicare) taken out. It's not really possible to mess that up regardless of how the W-4 was initially filled out.

If you are self-employed you are required to make quarterly estimated payments (04/15, 06/15, 09/15, and 1/15) or you will be assessed a (small) penalty. Some clients are diligent about paying timely and some don't care and would rather have more cash now and and pay it all in a lump sum on April 15th.

If you are a W-2 employee this doesn't apply to you. Even if you have an issue with lower withholding you can just pay the difference by April 15th and not worry about penalties.

Yeah, I usually overheld to get a little jan/feb "bonus" (I know its my money but still) but this year I have 1099 income that takes me way past what I used to pay. My understanding is I can lump sum it in the first year to get a base line, then do quarterly after that. Hope I read the reg correctly, guess my CPA will straighten me out if necessary. I wish the tax code had more useful examples and less convoluted methods of calculating things, but then we wouldn't need the IRS and a million CPA/tax attorneys, would we?

Sucks though, I could do a 5% 7 month CD with what I know I need to pay and effectively reduce my taxes. Not sure who ruined the lump sum game for us but oh well.

 

[diffusionx]

Yes, you are responsible for your withholdings throughout the year. Obviously this person could have looked at their pay stub at any time and saw no federal tax.

 

[elementalnocturne]

Yeah, I usually overheld to get a little jan/feb "bonus" (I know its my money but still) but this year I have 1099 income that takes me way past what I used to pay. My understanding is I can lump sum it in the first year to get a base line, then do quarterly after that. Hope I read the reg correctly, guess my CPA will straighten me out if necessary. I wish the tax code had more useful examples and less convoluted methods of calculating things, but then we wouldn't need the IRS and a million CPA/tax attorneys, would we?

Sucks though, I could do a 5% 7 month CD with what I know I need to pay and effectively reduce my taxes. Not sure who ruined the lump sum game for us but oh well.

Yeah, that is correct! You aren't required to pay quarterly estimates in your first self-employed year.

Then your estimated quarterlies in the second year are based on the lower of:
100% of the income for the prior year OR
90% of the income for the current year

 

[ReBurn]

Maybe i didn't explain right....the employer didn't take federal tax out of all of the paychecks during 2023 even though they were supposed to, despite the person having a W4 onfile that they didn't change at all during 2023. So its the employers fault there is a tax withheld shortage, not the employee. So im asking if they prove to the IRS that the employer didnt do what they were supposed to (take out tax in every check), who has to pay the shortfall?

It doesn't matter if the employer messed up. Mistakes happen. The taxpayer still owes the debt.

 

[ahtlas7]

The individual is responsible to pay their taxes. Try being self employed.

 

[Sub_Level]

I live in the US. Someone i know worked for a school district and was getting paid monthly. Despite having claimed 0 / single on their W4, the district in some of the monthly paychecks took zero federal tax out.

Now its tax time and obviously there was not enough tax withheld so they owe like $600 to Federal. Are they still the ones who have to pay it despite the district's screw up, or if it can be shown that they didn't withhold like they were supposed to, that the IRS can instead contact them and get them to pay the owed tax?

They dont have to pay the $600 all at once if they living paycheck to paycheck. Tell them to file now and pay what they can afford to now. Then finish off the balance by April 15. Late payment penalties and interest don’t start accruing until after April 15 so he has a little time.