Ex employee wants to collect old taxes

sportsmom12January 30, 2004

My son worked for a company all off 2002. Here is the situation- any help would be appreciated

1. The company had a system glitch and did not collect taxes from any employee(local taxes) for all 2002

2. They are paying the taxes but want all employees to reimburse them

3. My son would have gotten all that money back that year($250) due to low wages

4. Not sure if he will this year and I don't even know how to claim it?

Any advise would help

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kframe19

I'd say that their error is not his problem at this point.

    Bookmark   February 2, 2004 at 11:48AM
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talley_sue_nyc

I don't think you can apply the same principles for this that you might for a bill or something. We're talking the government, and they don't have any statute of limitations.

They may really have messed your son up, logistically.

Here's what I'm thinking should happen.
1) he reimburses the company for the taxes and gets proof from them that they've paid it\
2) the company should issue him an amended W2
3) he files an amended tax return for 2002 (do it right away--the only "statute of limitations" tax orgs recognize is theirs to pay you) and gets the refund.

    Bookmark   February 2, 2004 at 4:00PM
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trilobite

This is the company saying this? I think I would contact the state, and see if they have some insight. The whole thing sounds very sketchy.

    Bookmark   February 6, 2004 at 12:53PM
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wnlbutterfly

This does seem odd. If they didn't take taxes out of his wages back then, he would have gotten a W-2 showing his wages and showing no taxes paid out of that right? Then he filed his return. If he owed because he hadn't paid in taxes on that W-2, he would have paid IRS and State, if he didn't owe anything, he didn't get anything back since he hadn't paid it in (seems like the latter). So as far as the IRS is concerned he has statisfied his end of the taxes.

Something is very wrong with this company. Sure, maybe a computer glitch, but could also be they were claiming employees as statutory, which means not withholding any taxes, and if someone called them on it, they are backtracking and trying to clean things up. When they claim statutory, they don't have to pay matching social security, which is out of their pockets. But it should have been on a 1099-misc if that was the case.

If that is what they did that money might be going into his social security fund, and in that case means he wouldn't be getting that back. I would clarify with this company on that issue as well. (If it's Federal taxes, State taxes, or Social Security).

I wouldn't send them any money. Your son has squared things with his taxes just fine.

Now if you do send money...they had BETTER send you a corrected W-2. You will have to amend that years return for both IRS AND STATE (and if you aren't doing it yourself....you are paying more expenses out of pocket for the companies errors). So basically you are sending them money, then having to ask IRS/State for that money back, what is the point other than to get the company out of hot water.

I work for a tax prep office and hubby works for IRS. Let me run this by them both this weekend and see what I get and will post again. I think they will back me up on this, but I like to double check.

    Bookmark   March 10, 2004 at 10:07AM
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liketolearn

I believe Sportsmom12 is referring to LOCAL tax (not Federal or State) that was not collected by employer. Do not confuse LOCAL tax with Federal or State tax.

When your son had his taxes done for 2002 he should have filed a Federal, State, and LOCAL return. The LOCAL return should have showed that he did not have LOCAL tax withheld and therefore he probably paid the LOCAL tax he owed with his 2002 LOCAL return. So no need for him to pay the company. If his income was low enough he may have filed his LOCAL return and had no tax due (rules for LOCAL returns vary).

Should the company have to pay the LOCAL tax and your son does not reimburse them the company may either: 1) pay the tax bill and consider it their loss or 2) the company could pay the tax bill and issue your son a 1099-MISC for the amount they paid on his behalf (it would be considered income). The 1099-MISC would be included as miscellaneous income when he does his taxes next year.

Not meaning to shout LOCAL just want to make sure everyone realizes we are referring to local tax and not Federal or State taxes which have different rules.

    Bookmark   March 15, 2004 at 1:34AM
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sportsmom12

Like to learn- I am really confused now. I have never filled out a local return?=only state and federal. We have always paid local taxes (both me and my son) Can you elaborate more on doing a local tax return? When I file my federal I use the itemized form(A) and put this down as taxes paid. My son of course doesn't itemize- so is that what you meant he could fill out a local return? Like I said, I have never heard of that
Thanks

    Bookmark   March 15, 2004 at 7:47PM
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wnlbutterfly

I am here at the tax office (no names), and yes, some cities have local taxes. Most likely if you don't know about local taxes, you don't usually file that.

SO...I would say....DO NOT pay them back. It should actually go on a W-2 as more wages and you would file that next year, they might put it on a 1099-misc, and you would file a schedule C if they do that, and for Federal, anything under $400 doesn't require self-employment taxes. It would just bump up his income that $250 without any additional withholdings. I would bet that the company will not file the paperwork correctly and you will get something odd (like a W-2 with no wages and just the local taxes at $250), or a nonemployee compensation...we see all sorts of stuff.

Just remember, that the IRS will only receive what the employer sends them, so if they send a 1099-misc, go ahead and file it like that and don't worry that is might not be on the correct form. You are talking a very small potatoes for the IRS.

But all the tax pros here are voting to not pay the company back, their mistake. Laura

    Bookmark   March 18, 2004 at 11:03AM
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