I have a question from a guy who is definitely an employee, turned in his W-4, but over the course of law year his employer withheld nothing from his paycheck. He apparently didn't notice, spent all that money and now can't afford to pay his taxes.
He's trying to borrow the money to pay his taxes. But the question is to what extent does the employer have any responsibility, and is there any help for him other than to dig himself out?
Thanks.
Is the "employer" treating him as an employee or as an independent contractor (W-2 vs 1099)?
The employer acknowledges he's an employee - they just forgot (so they say) to withhold anything. I don't know if they paid their share of withholding taxes, but my guess is that they did.
§ 6672 penalizes willful failure to collect and pay over tax. This sounds like clerical error or administrative oversight unless they "forgot" to withhold for others on the payroll. Absent the employer voluntarily helping out, I'd say the taxpayer is pretty much on his own.
The employee owes his taxes and has to dig himself out the hole. No good news there.
Any responsibility the employer has to help the employee is probably minimal (or non-existent) but it may be worth asking for help. There are significant potential penalties (including the theoretical possibility of criminal penalties) to the employer for failure to withhold. The employee may want to consider asking the employer for a low cost loan to pay the taxes due ("I don't have the money to pay the IRS. I'll have to ask for a payment plan and they will want to know why I didn't have any withholding"). It is in everyone's best interest for the employer to make sure the employee pays the taxes that are due. If the employer isn't bright enough to figure this out, this approach may do nothing other than anger the employer so the employee will have to decide whether this approach is worth the risk.
Thanks. That's pretty much what I thought. But I wanted to check to see if there might be some way to convince the employer to be more helpful. Apparently there's not.
Isn't this why pay stubs generally show the withholding (is this itemization required by law or just customary)? How can an employee go an entire year and not notice that nothing was withheld? He certainly shares some of the responsibility for not getting this corrected before he ended up in a hole he couldn't climb out of.
I can't argue with you about that!
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