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.
