Posts tagged: liability

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AUGUST 12TH, 2009
By CPA SAM

Where Do I Put The Money?

Q. I’m a new employer and have started withholding taxes from my workers checks.  Where do I put the money?

A. Definitely don’t put it under your mattress!  Publication 15 from the IRS is what I like to call the Employer’s Tax Bible. Every employer whether new or seasoned should look through that document each year.  Within its pages, you will see a schedule of how often you must remit the taxes you withhold from employee checks to the IRS.  The section that relates to your question is chapter 11 “Depositing Taxes”.  The frequency depends on the total amount of tax liability you report.  Certain employers can remit their totals with their quarterly 941.  Certain employers must make a deposit monthly.  Still others get semi-weekly treatment.  The largest employers have a next-day obligation for deposits. You can make your deposits using the EFTPS system, or take a paper coupon and check to the bank. If you are using a payroll service, they can likely handle the deposits for you.

All money withheld from employee checks must remain in trust once it comes out.  The employee is relying on you to put their tax payments into an account and pay it for them.  Then, once per year when they file their taxes, those payments will count toward their tax liability.  Many employers recently have been convicted of not paying these taxes and instead running with them or spending them on business or personal expenses.  You don’t what to join that crowd.  Here is a link of some of the cases where employers didn’t pay over the money they withheld.

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categories Employer, Payroll

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MARCH 6TH, 2009
By CPA SAM

Yikes, No Taxes Withheld!!

Q. I found out (quite to my surprise) last month that my employer has not deducted CA state taxes from my paycheck ALL YEAR! Jan-Aug 08. I found out because they then suddenly started deducting and I noticed the difference. When I questioned them, they said they had found out the previous month that state taxes were not being deducted and now also needed to deduct for the tax that was not taken out in the first place.  What do I do?

A. This is a very serious problem and I can understand your confusion.  One thing not noted in your question, did you receive a pay stub each time?  California has some of the most stringent labor laws in the country. Your employer is  required to provide you a statement showing the  total wages you earned and the deductions from your gross pay.  If you were provided a pay stub, did you not see there were zero taxes withheld?  Have you filed CA tax returns in the past and had no liability?  If so, the withholding is perhaps not necessary anyway for state.  If you did indeed have a tax liability in the past, you definitely should be paying closer attention to the pay stub.

Does your employer have a DE-4 on file for you?  If so, he is required to withhold taxes based on that statement.  If he does not withhold, you are on the hook for the difference.  A principled employer will pay the taxes relating to the mistake for you. This will increase your income since they are paying taxes on your behalf.  If the taxes are not paid for you, estimated payment may be in order and a quick call to the Employment Development Department to report the lack of withholding may be in order.  I did not include all the details from your question, but some of the things going on at that employer are a bit disconcerting.  The things they asked you to do appear to show ignorance or blatant disregard of their withholding responsibilities.

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categories Employee, Payroll