My employer never withheld taxes from my 06 pay. Now wants to treat the pay as an “advance” for 2007. Legal?
Question by Stephen C: My employer never withheld taxes from my 06 pay. Now wants to treat the pay as an “advance” for 2007. Legal?
I was an employee for a small company that was having severe cash flow problems. My boss started paying me with “personal checks” written by hand from the company. He would pay me the net amount that normally would show on my regular paychecks. Turns out he wasn’t withholding any tax, FICA, etc for the IRS. Now that taxes are due, he wants to treat all those checks as an advance on 2007 income. Is this legal? Should I go along with it? I believe he will be treating it all as 1099 income eventually for 2007. Along with paying me a gross up amount as 1099 income in 2007.
I have filed for an extension. In that extension I figured that I would have to report the income received from those “checks” as 1099. So I made a massive payment to cover the FICA. I already have a w-2 that only covers the real paychecks I received. The company still has no money to produce a correct one reflecting all pay.
Best answer:
Answer by Luey
Consult a tax lawyer, ASAP!
Know better? Leave your own answer in the comments!
No, it’s not legal – you worked and got paid in 2006, so that’s when the taxes are due for. And he is in MAJOR trouble for essentially withholding the money, but not remitting it to the IRS.
Don’t go along with it – you’ll be in trouble right along with him. But you’d better call the IRS and tell them about it. How are you filing your taxes for 2006?
Tell him to get you your W-2 for 2006 immediately or you will file a missing W-2 complaint with the IRS. It’s his problem (and a big one at that) if he didn’t pay his payroll taxes.
Your income earned in 2006 is taxable in 2006 and is NOT an “advance” on 2007 income.
You should have been working this back in Feb! Why have you waited until the last day? You’re potentially screwing yourself, you know.
Also, if he does not provide you a w-2 but did withhold taxes and you can prove the amount, you should be able to claim this amount even though he did not report or pay it.
Do use a professional, not just a run of the mill tax person.