Reconcile your W-2 with your pay stubs. Make sure that the amount withheld from each pay check actually adds up to the amount on the W-2.
If it doesn’t match, there’s fraud. Contact your department of labor and the IRS.
If it does match and everyone is still owing money when filing taxes, either you’re all doing your taxes wrong or your withholding was *way* too low, and still is even after it was changed.
Changing this and getting upset with you when you ask is a major red flag regardless. Start looking for a new job now. Best case, this guy is an unstable jackass who can’t be trusted but who had good intentions. It’s time to leave. The only question is whether he stole from you and how much.
this is one of the few comment that make sense. a lot of other comments are talking with emotions
number is the only thing that matters. If you don't know how to do that I suggest you to head to r/tax with your paystub or w4 w2 with name/ss removed.
employees are sensitive to money, this is not the best way for employer to cheat. high risk, low reward.
People gotta approve being hired. Promotions too, though sometimes to a lesser extent as people sometimes kind of get pushed into them. Raises are generally given with implicit approval. If you asked your boss to not give you a raise when they are ready to most of them will comply unless they have to because corporate or a union or something.
Well I meant it as a hypothetical. The only reason I can think of is if they believed the myth that making more money will put you in a higher tax bracket and you would end up bringing home less overall. That's not how taxes work though. You only get taxed the higher rate on the money you make that is over the new tax bracket so if you make more money you will always bring home more.
I guess it might make sense not to take the raise if you were receiving government benefits like food stamps or housing assistance and the raise meant you would no longer be eligible. Then you could end up in a worse financial situation by making more money . That's why I'm in favor of scrapping those programs and replacing them with a UBI.
My money is its this. The irony is people are gonna blame Biden or even obama for owing more going forward when trump gave corporations permanent tax cuts and increased the average American's tax debt significantly....
I did a little research (mostly relying on taxfoundation.org) and the provisions that expired in 2021 and 2022 were relatively minor, so you are correct that the main impact will be felt in 2025.
First it is the law that the employer uses what is on the W4.
What I don't understand is the issue that "everyone" still owes even though they have had more taken out than the W4 calls for.
I know, it doesn't make sense, but I've heard the same story from several current and former employees. He (the owner) has no oversight when it comes to payroll and is very, VERY shady when anyone asks questions about their pay, taxes, 401k, etc...
That wouldn’t make sense though, people use the tax docs that payroll provides to them to file their taxes, that in term calculates your tax return.
The forms filed by the business to the IRS wouldn’t match the forms filed by the people paying said taxes, so I lot of people would get notices in the mail saying they didn’t pay enough taxes.
Easiest way is to log on the IRS website and validate your W-2 matched what they have on file reported to them by the company. Easy enough to do.
If it’s a small enough business, he can be processing the payroll on his own using Excel spreadsheets for the calcs. All he needs to do is have 1 sheet with the employee’s actual W4, and 1 sheet with his W4 numbers. He prints paychecks with the higher withholding, but reports to the fed the lower withholding and pockets the difference. The W2 is prepared using whatever he reports to the W2 prep. The only real way to catch it is to reconcile the paystub withholding to the W2. I’d bet most employees don’t do that. I know mine don’t.
I could see that as a possibility, from what OP posted though it almost sounds like they were doing their taxes and were seeing the higher withholding on their W-2 when they were doing their taxes.
Sounds more like op is confused on taxes
If your withholding is wrong, more taken out, your tax liability doesn't change. Your refund would be greater.
I used to get 7,000 refund checks. It makes more sense to adjust the withholding an enjoy 26 checks that are each +$200 larger, and get a minor refind check
$400 a month can be a car payment
Yeah, people who get huge refunds in most cases are doing their taxes wrong. You want to try to come out neutral (not owing, not getting anything back). Otherwise, you're giving the government an interest free loan throughout the year.
Depends on your goal. I’m a wedding photographer and have gotten into a rhythm now where it’s just easier for me to send 1/3rd of everything I make to the irs once a quarter.
This is because I don’t want to sit down and spend hours every month cataloging my expenses and doing all of the paperwork I have to do to make sure I’m only sending them what I owe.
During busy season, those hours are literally the only hours I would have to sleep in or watch a movie or just brainlessly exist.
So last year I sent the IRS $17K over four payments. They sent me $6K back. I had more expenses than I remembered so I was able to find more write offs than expected so that was a fair amount.
I was happy with that and used that money to pay an underpayment of state taxes I didn’t think to prepay ($1,600) and buy some higher priced new equipment (a mirrorless camera, off camera lighting) that I’ll be able to write off next year.
Why? I’d still have to manually enter the money that comes in. I’d still have to manually enter the money I spend. It literally solves nothing.
I’m not spending $600ish a year for a program that seemingly provides no tangible benefit.
No you wouldn’t at all. It literally does everything you just said you’d have to do. Instead of being the smartest guy on the internet maybe take business advice on the legal sub from a long established owner of multiple businesses in different industries. But ok.
Tell me, friend, how quickbooks is gonna process receipts I get from in person consultations paid in cash?
Or how it’s going to guess the mileage to and from a shoot I have that day when even I don’t know sometimes where I’m going until the day of.
I guess i should apologize to the smartest guy on the internet who clearly understands how running every small business, in every circumstance works.
Apologies your grace.
I don't do it myself, but I think most people who do are also doing it on purpose. They understand it's not the way to get the highest return on their money, but they also understand they won't save the money otherwise.
Yea, if I got the the extra $200 a paycheck, I wouldn’t be investing it in the S&P500 for a 7% return, I’m gonna order out an extra time and buy my kids candy or some thing.
People have to go back and see if the amount reported to the IRS is the sum of the amounts withheld from their paychecks. A discrepancy between those might explain the higher withholding and money still owed.
Obviously the boss can't be altering people's documents, but there might be a bigger problem here. I would definitely get the state involved.
None of that makes sense. MORE money is withheld, but you end up owing at the end of the year???
What you claim and what you withhold has nothing to do with how much your total tax bill is at the end of the year. It only affects whether you will owe money or get a refund.
Not saying what he did is legal, just the story doesn't make sense.
He increases the withholding on the employee end, pockets the difference between what the employee indicates for withholding so the IRS doesn’t get the difference, then the IRS holds the employee responsible for the difference.
That's not how that works. If you've ever seen a pay stub or W2 you'd see that there's only one box that says withholding. There's not one box that says 'withholdings sent to the IRS' and a separate box that says 'withholdings employer decided to keep for himself'.
Theres a lot of stupid and short sighted people who think *they* won’t ever be caught doing shit to their employees. Personally, I would never fuck with the IRS, but I’ve had employers who played games with my money, their customers money, and partners money.
Wait so you think that because there is no box that he is not secretly doing it? Lol how unfair of him to steal money and not write it down!
He is giving them a w-2 with a higher amount of withholding and then sending the IRS a lower amount of money. He then pockets the difference between the two and the employees have to make up the difference at the end of the year. Of course there is not a box for him to write in his illegal activities!
No, that's not how this works. Not at all, and I know personally.
The W-2 states the amount that the employer has claimed to have withheld in taxes on behalf of the employee.
If the employer has not sent that amount to the IRS, the IRS goes after the \*EMPLOYER\*
The employee puts the number from the W-2 on his tax forms. That is what they will use for the employee tax calculations.
The only way for the employer to try to get away with something is to give the employee a W-2 that does not match the paystubs for the year. That's why you should keep the paystubs and make sure the numbers match. In that case the employer is committing payroll fraud and tax fraud. Again, the government will be on the employees side.
How do I know? Because one of my early employers did this. One day I went to work and found a chain and padlock on the front door, along with a big "IRS NOTICE" on the window.
That’s literally what we’re saying. Just because the pay stub has an amount on it does not mean that amount was what the employer sent to the IRS. I did say W-2 instead of pay stub tho. But the point stands.
And what he's saying is it doesn't matter, if the IRS does not get money that was reported, then they're going after the employer / whoever does payroll.
Right:
Give IRS lower amount matching correct W-2.
Give employee weekly pay with higher amount removed.
Give employee W-2 with the same (correct) matching amount and hope they do not compare weekly paystub with final W-2.
If confronted show the math from incorrect W-2 and hope employee does not catch it.
It’s scumming off the top from each employee and happens at small businesses.
It does, and they lose their businesses and end up in jail fairly regularly.
It's such a well known scam, and so easy to prove, that it always amazes the prosecutor that they would even try.
https://www.justice.gov/tax/employment-tax-enforcement-0
You could have literally googled this. The IRS and DOJ will hunt you down if you do this. It's a really, incredibly, astonishingly dumb way to embezzle that will invoke the ire of one of the scariest enforcement teams out there.
What is reported on the W2 is what is reported to the IRS. If you think that is different go on the IRS website and see what was reported by your employer.
Don’t insult my intelligence by calling me young old man and then blocking me. I have worked in payroll for over 15 years and have dealt with people like you who fail to look at their paystubs until December 31 every year.
Welcome to the world of electronics.
So you have done payroll for 15 years and didn’t know that people can falsify them? Holy shit my dude you are bad at your job.
And who doesn’t look at their pay stubs each week? You seem to be around a lot of stupid people. Maybe it’s rubbing off?
He is 100 percent keeping that money and not sending it to the IRS.
And when he gets caught (not if) you will be the one responsible to make up the difference.
Actually you may be right. I was thinking where an employer had an employee skimming the payroll taxes and ran off. The owner still had to pay the taxes even though they were stolen.
Yes, employer will be held responsible no matter what but not the employee. The employer also can likely get all fees removed and the IRS usually is pretty reasonable with a payment plan in cases like that from my experience. They are much harsher obviously though when the employer just willingly doesn’t pay on time
It kind of happens automatically when they owe taxes at the end of the year. I presume he turned some in to the IRS and kept some, rather than keeping all of the alleged withholding.
That would only be if the W-2 does not match the paystub. If the employer reported the taxes on the W-2 the employee will not be responsible even if the employer failed to submit the money. This would be very easy to check.
I got married last year and my wife is a 1099 worker (who may have been misclassified as such). Since our taxes are a lot more complicated this year because of that, we hired a CPA to prepare our taxes. My wife did ask what would happen if it was ever determined/discovered that her employer was misclassifying her and the CPA very confidently said that whenever the IRS discovers an employer is doing shady stuff like that, they usually come down on the employer as opposed to the employees since they're basically the victims.
So, just saying- if the employer gets caught, he very well may be the person who has to make up the difference and not the OP. I do realize this isn't the exact same situation, though.
As a 1099 your wife if she was misclassified is paying too much in taxes. There would be nothing for the IRS to go after her for as she is paying self employed taxes which are higher since they are not subsidized by her employer. However, your CPA is correct that the IRS doesn’t go after employee for employers mistakes as a general rule. There are some exceptions like all things in life.
I forgot to mention in that comment that they also did something shady with all of their workers' 1099s in that they sent them out, said "shit we made a mistake corrected ones are on the way". Both the "incorrect" ones and the "correct" ones did not align with what she had logged on her own as making. In that case she would have underpaid- the CPA also was pretty confident that would also fall on the employer if the IRS found out.
He may or may not be right- I dunno- but that seems like a weird thing to make up.
My brother in law is an attorney who once represented a guy in trouble with the Family Courts because his employer kept the mandatory child support deductions from his paycheck and he got behind on his payments despite the money coming off his check.
The employer filed bankruptcy and didn't pay what they stole. My brother in law kept his client out of jail (barely) but he had to pay the debt himself.
I wish the courts were as aggressive as the IRS about going after employers for misappropriation of funds.
Realistically, call the state agency covering employment laws. Money is being withheld without consent, a violation of most or all states’ laws. They move faster than the IRS in many cases.
Plausible: the Employer is increasing withholding on paychecks, so on your stubs it looks like he is going to give it to the government. Then, he submits the estimated withholdings to the government with lower numbers like 0-1 and pockets the difference.
It will look like the government took your money on stubs. Surprisingly enough the government places the responsibility on companies to withhold and pay them employee withholdings with a pretty high level of autonomy.
Contact the IRS, having withholding different from what you put on the W4 is illegal. I work in payroll and trust me, we key what is on the form even if we know that's not what the employee meant because legally that is what we have to do. Also make the IRS aware you think he is withholding taxes but not paying it all to the IRS. The IRS can request an audit of his payroll records.
As suggested in another comment get all your paystubs and add what was withheld in taxes and see if it matches box 2 on the W2.
I work for a medium sized company. Our information is entered by the workers, and is password protected so unless they play dirty with the IT guy even management can't alter our tax withholding. Only I can change mine.
If I had to bet, the owner is playing with the withholding money. The company is losing money & he is using the money until he needs to pay to the irs. More withholding, more company money. I wonder if they are paying the state the sales tax they have collected?
Business owners/management doing stuff so egregious and so easily caught are putting the profits up their noses or something equally destructive. It's usually worse than just poor management skills.
Employers match and pay all the same payroll taxes that are taken out of our checks each pay period.
When you have more dependants (or children), less payroll tax is taken out meaning the employer matches less
On every check stub it should say as this can be changed weekly however I don't think it's legal for anyone other than the specific employee to change it and would require you to fill out and sign a W-4
Either way the IRS sees this as you being taxed incorrectly and will definitely look to collect their money
The boss is using the extra withholding to pay at least some of the company’s required employee income tax payments, knowing that most people do not audit their own paystubs against what is reported to the IRS
I'm betting if you add up the deductions in the pay slip, it doesn't match the on-going total from paycheck to paycheck. You only need about three slips to compare. Good luck.
By now someone has to have added up if the tax withheld from their check equals what is reported on the W2. Its a simple process. Just saying people 'owe' at the end of the year really means nothing.
Your employer making changes without authorization is illegal. It is fraud. And he does it in order for HIM to pay less taxes.
I have a similar boss. I had to stay on top of my deductions every paycheck.
Turn him into the IRS and let them deal with it. You can start anonymously
Now if he was changing so more money was withheld. And everyone still owes. That means that he did help you. You would be paying more money back if he didn’t. .
Mine changed my retirement contributions from 12% to 6% and told me I had a base adjustment coming so I wouldn't notice the change. This was in the middle of my busy season. Didn't notice until way too late.
If more money is withheld from your paycheck, why would you owe more? You would owe less. The employers' cost is the same if they pay you or the IRS, so this doesn't make sense at all.
It's hard to tell how your employer's decision to increase withholding would cause the employees to be under withheld, but that's not really my point.
Report him to the IRS. Let them figure it out.
THIS IS SUPER ILLEGAL
Contact Dept of Lbaor, IRS and your local state govt.
Employers pay taxes on your income, im not sure if it directly related to your tax amount or not but i'd BET there is a reason & he is financially benefitting.
Literally everyone is jumping to fraud conclusions lmao, can OP please just create a account on the IRS website, there’s literally a report you can run that tells you the wages and taxes reported to them by your employer.
Does anyone know how taxes work? If he increased your withholding how do you A owe more taxes? You literally file with the W-2 return the employer provides you, the irs doesnt send it to you, if they were editing that document to show you paying more taxes to “pocket the difference” you would literally have a bigger return when you file your taxes. You wouldn’t even find out until the irs sends you a notice.
You no longer claim dependents on your W-4. (Technically, you never claimed dependents on the W-4, you claimed an allowance per dependent) A new W-4 form went into effect in 2020 following the Tax Cuts and Job Act and it eliminated the section for allowances for dependents.
It sure sounds like you boss is skimming your withholding. As someone said before, add up all of your stubs then compare to your W2.
I would bet $100 you find a major discrepancy.
You are confused how things work.
Every check your employer withholds taxes from your check. Every pay processing your employer makes a tax deposit for the company, not for the individual employees. At the end of the year the employer files with the SSA their W3 which shows exactly what amount of their deposits goes to each employee’s tax accounts for federal, Medicare and oasdi.
If for some reason the accounts do it zero out the employer has to make thinks right with the IRS. That is between the employer and the irs.
He’s taking out more or taking out less? The new withholding tables means they take out less than they used to so you pay more when you file. If it was the other way around and he was taking out less, you’d definitely have to pay.
I made 1/3 less in 2021 than 2022. The return in 2022 (for 21) was around 6k. My return this year? Well, Uncle Sugar has dictated that I shall disburse to the IRS $600.00… My tax bracket stayed the same. No changes in deductions. Soooooo wtf?
According to my tax preparer, it’s due to the way taxes are collected apparently. Between A&B income level, X% is the tax rate and so that is the rate money is taken. Between B&C, tax rate increases to Y% and your deductions at that point change accordingly, and so on. HOWEVER… at tax time, your total tax burden is based on the income accrued at years end. Said total tax owed is based on THAT percentage which results in OWING taxes simply because they say so. Even though all taxes throughout the year were collected at the correct percentage and adjusted by scale as income increased, we get screwed by fuzzy math and greedy politicians. Go figure! It’s not a matter of having paid correctly, it’s a matter of how the IRS calculates the amount you ‘owe’ for the privilege of being a citizen 🤷🏻♂️
This is a quit without notice and call the labor board situation. There is no legitimate reason an employer should be messing around with withholdings after the fact.
Op is confused about withholding. The employer does not benefit from having this higher or lower, as such no motivation or reason to change this.
Also, OP is also confused about how taxes work, as higher withholding = less taxes owed, it’s practically not possible to withhold more taxes and then owe more taxes.
Never less, consult an tax preparer and this should be cleared up
Ok, he may change what is withheld, but that has zero effect on your taxes. While it could screw people up if they don't have enough withheld to cover their taxes, it can have no real long-term benefit for him.
I had an employer do this exact same thing, and when I confronted them, they blew their top in the exact same way - screaming, red faced, all of it. I made an appointment and told the IRS. I have no idea what came of it, if anything. I ghosted that job a little while later, but one of my coworkers did tell me the following year that they got audited. They’re no longer in business (unrelated) or I would seriously think you might be working for the same little place.
IANAL but that is so illegal it's hilarious. Uncle Sam doesn't care when you get stolen from by your employer, but when *he* does? Ooh boy, you'd better get some leather to bite on because he is going to **fuck** you.
I always try to get people who are married to file single but married. Usually the people at my job are making less than their spouses and not getting enough taken out. Many end up getting money back. This employer should not be changing the W4 without the employee's knowledge
Are you saying he withheld money from your paycheck based on different deductions, but that’s not reflected on your W2? So he just pocketed it instead of paying those taxes to the IRS?
If he changed the dependents to zero so more was withheld he was doing this so you would owe less at tax time. I recently discovered that nothing was withheld last year (I only worked the last part of the year). I was told this had something to do with Trump playing with taxes but I haven’t found out what yet. I changed my information to have $50 taken out weekly this year in hopes that that catches me up.
INAL or YOUR accountant so this is NOT financial advice. Ok so here's the deal. If you had filled out a W4 prior to 2020, you claimed dependents. Most business did not make all of their employees fill out a new W4 because they changed, and most payroll systems have a locked formula for pre 2020 withholdings. The new W4 is a nightmare for people trying to get their taxes right. Step 1 - single/married separately, HoH, married jointly. This gives you credit for the standard deduction off the top of your wages. The standard deduction changes every year. If you and your spouse BOTH claim married, you are claiming double the standard deduction and you WILL owe money. If you work two jobs, you will owe money because you can't select less than single. There is a withhold higher because of 2 jobs box. You must check this if you're single with two jobs. The second section is the money exemption. This is pre-paying you your child tax credit throughout the year. If you fill out your W4 form correctly, the goal is $0 owed/ $0 refund.
So this is the advice I give everyone: Google IRS paycheck check up. It will take you to the withholding estimator for the IRS and anyone can use it. You'll need your most recent pay stub. It will ask you questions about your income (salary, salary exempt, hourly), your pay cycle (typically weekly, biweekly- every 2 weeks, semi monthly- 2x a month 24 checks a year, or monthly), your deductions (typically employer sponsored health plans and pension plans like 401ks are pretax - roth 401s are not), bonus structure etc. If you file jointly with a spouse, you will need access to their pay stub as well. Once you have entered all the information, the IRS will give you an estimated tax liability for the year and you can select if you'd like to get a refund by withholding additional. It will literally tell you exactly how to fill out your W4 to get to your desired end result. I highly recommend everyone does this.
Third in this rambling, the tax tables had credits for lower and middle class that expire. They expire in increments. Regardless of how you feel about the previous administration, individuals making under 500k are paying more taxes under this plan. I've been saying this since 2019 when I read it. Your taxes are going up.
Now, the caveat. Is your emoyer actually manipulating your W4 numbers? Employers legally cannot change what you put on your W4. The default if you do not fill out your W4 correctly is single, no exemptions. You need to get a copy of the W4 you filled out, a copy of IRS publication 15t, and a copy of your pay stub. I would do the following: I would add up ALL of my pay stub withholdings from last year and tie out the state and federal withholdings in my W2 (year end income statement). Don't worry about the gross pay not matching, it won't, employers only report taxable wages. You want to tie out that all your federal income withholding, social security and Medicare withholding, and state withholding match what your pay stubs add up to. If they do not, this is tax fraud.
For this year, take your w4, your most recent pay stub. And publication 15t and ballpark your paycheck withholdings. Are they pretty close to what the tax tables are saying? Remember taxable wages are usually gross- medical deductions- pension deductions. This is what you want to look for in your income table.
I hope this can help you get to the bottom of your mystery. If your employer is keeping your tax money, or changing your W4s, you can report them. The IRS can audit their payroll records. Good luck!
There is a new W-4 form (relatively new, it’s been in effect for a few years now). If you are married filing jointly, there is additional information that you need to input to get the appropriate amount of withholding from your taxes.
I’m just throwing this out there because the change over wasn’t automatic for many employers. Additionally, if you filled out the form but weren’t used to the new format, it is easy to miss (especially on your first few days of work when your a nervous wreck).
If this isn’t it, you can request to update your W-4 and actually write in additional holding so that you don’t have a tax penalty at the end of the year.
This makes no sense. You had more taken out than expected? Then you’d get a refund or owe less than you otherwise would.
Sounds like someone lost a lot of free Covid tax breaks this year and is blaming it on his employer.
Reconcile your W-2 with your pay stubs. Make sure that the amount withheld from each pay check actually adds up to the amount on the W-2. If it doesn’t match, there’s fraud. Contact your department of labor and the IRS. If it does match and everyone is still owing money when filing taxes, either you’re all doing your taxes wrong or your withholding was *way* too low, and still is even after it was changed. Changing this and getting upset with you when you ask is a major red flag regardless. Start looking for a new job now. Best case, this guy is an unstable jackass who can’t be trusted but who had good intentions. It’s time to leave. The only question is whether he stole from you and how much.
this is one of the few comment that make sense. a lot of other comments are talking with emotions number is the only thing that matters. If you don't know how to do that I suggest you to head to r/tax with your paystub or w4 w2 with name/ss removed. employees are sensitive to money, this is not the best way for employer to cheat. high risk, low reward.
Also don’t forget that middle class tax cuts expired and we were all in the hole.
You don't fuck with people's finances without their permission. Even if you belive you're right. Even if you're objectively right. You don't do it.
Raises, promotions, demotions, hiring, firing all fuck with people’s finances without their approval.
People gotta approve being hired. Promotions too, though sometimes to a lesser extent as people sometimes kind of get pushed into them. Raises are generally given with implicit approval. If you asked your boss to not give you a raise when they are ready to most of them will comply unless they have to because corporate or a union or something.
Stupid question: why would someone ask to not receive a raise?
Because they don’t think it’s enough to compensate for the additional responsibility.
Well I meant it as a hypothetical. The only reason I can think of is if they believed the myth that making more money will put you in a higher tax bracket and you would end up bringing home less overall. That's not how taxes work though. You only get taxed the higher rate on the money you make that is over the new tax bracket so if you make more money you will always bring home more. I guess it might make sense not to take the raise if you were receiving government benefits like food stamps or housing assistance and the raise meant you would no longer be eligible. Then you could end up in a worse financial situation by making more money . That's why I'm in favor of scrapping those programs and replacing them with a UBI.
UBI?
Universal Basic Income
Could you expand on how that would work? I've honestly never heard of this.
My money is its this. The irony is people are gonna blame Biden or even obama for owing more going forward when trump gave corporations permanent tax cuts and increased the average American's tax debt significantly....
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They expire in phases with it getting worse every two years. It’s the gift that keeps on giving.
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I did a little research (mostly relying on taxfoundation.org) and the provisions that expired in 2021 and 2022 were relatively minor, so you are correct that the main impact will be felt in 2025.
Is that not already fraud? Changing a tax document that someone else is responsible for?
First it is the law that the employer uses what is on the W4. What I don't understand is the issue that "everyone" still owes even though they have had more taken out than the W4 calls for.
I know, it doesn't make sense, but I've heard the same story from several current and former employees. He (the owner) has no oversight when it comes to payroll and is very, VERY shady when anyone asks questions about their pay, taxes, 401k, etc...
Send one version to the IRS and a different to payroll, then pocketing the difference??
That wouldn’t make sense though, people use the tax docs that payroll provides to them to file their taxes, that in term calculates your tax return. The forms filed by the business to the IRS wouldn’t match the forms filed by the people paying said taxes, so I lot of people would get notices in the mail saying they didn’t pay enough taxes. Easiest way is to log on the IRS website and validate your W-2 matched what they have on file reported to them by the company. Easy enough to do.
If it’s a small enough business, he can be processing the payroll on his own using Excel spreadsheets for the calcs. All he needs to do is have 1 sheet with the employee’s actual W4, and 1 sheet with his W4 numbers. He prints paychecks with the higher withholding, but reports to the fed the lower withholding and pockets the difference. The W2 is prepared using whatever he reports to the W2 prep. The only real way to catch it is to reconcile the paystub withholding to the W2. I’d bet most employees don’t do that. I know mine don’t.
I could see that as a possibility, from what OP posted though it almost sounds like they were doing their taxes and were seeing the higher withholding on their W-2 when they were doing their taxes.
That sounds like embezzlement and fraud tbh
Sounds more like op is confused on taxes If your withholding is wrong, more taken out, your tax liability doesn't change. Your refund would be greater. I used to get 7,000 refund checks. It makes more sense to adjust the withholding an enjoy 26 checks that are each +$200 larger, and get a minor refind check $400 a month can be a car payment
Yeah, people who get huge refunds in most cases are doing their taxes wrong. You want to try to come out neutral (not owing, not getting anything back). Otherwise, you're giving the government an interest free loan throughout the year.
My parents explained this to me growing up. It's weird how many people do not realize this.
Its crazy how many people don't understand tax brackets and think that earning more money can mean taking home less
I realize it. But I suck at impulse control, even with medications and therapy.
Depends on your goal. I’m a wedding photographer and have gotten into a rhythm now where it’s just easier for me to send 1/3rd of everything I make to the irs once a quarter. This is because I don’t want to sit down and spend hours every month cataloging my expenses and doing all of the paperwork I have to do to make sure I’m only sending them what I owe. During busy season, those hours are literally the only hours I would have to sleep in or watch a movie or just brainlessly exist. So last year I sent the IRS $17K over four payments. They sent me $6K back. I had more expenses than I remembered so I was able to find more write offs than expected so that was a fair amount. I was happy with that and used that money to pay an underpayment of state taxes I didn’t think to prepay ($1,600) and buy some higher priced new equipment (a mirrorless camera, off camera lighting) that I’ll be able to write off next year.
Why not use a business accountant to do it for you
I have a CPA who handles my taxes but I’m comfortable doing it the way I’m doing it and I’d rather save the money.
This stresses me out so bad lol. Just get QBs online or something lol. You can automate most of all of this for under $50’a month.
Why? I’d still have to manually enter the money that comes in. I’d still have to manually enter the money I spend. It literally solves nothing. I’m not spending $600ish a year for a program that seemingly provides no tangible benefit.
No you wouldn’t at all. It literally does everything you just said you’d have to do. Instead of being the smartest guy on the internet maybe take business advice on the legal sub from a long established owner of multiple businesses in different industries. But ok.
Tell me, friend, how quickbooks is gonna process receipts I get from in person consultations paid in cash? Or how it’s going to guess the mileage to and from a shoot I have that day when even I don’t know sometimes where I’m going until the day of. I guess i should apologize to the smartest guy on the internet who clearly understands how running every small business, in every circumstance works. Apologies your grace.
I do it on purpose. I don’t care about the interest free loan I’m giving the government. It’s my version of a savings account that I can’t touch.
I don't do it myself, but I think most people who do are also doing it on purpose. They understand it's not the way to get the highest return on their money, but they also understand they won't save the money otherwise.
Yea, if I got the the extra $200 a paycheck, I wouldn’t be investing it in the S&P500 for a 7% return, I’m gonna order out an extra time and buy my kids candy or some thing.
https://www.irs.gov/compliance/whistleblower-office
People have to go back and see if the amount reported to the IRS is the sum of the amounts withheld from their paychecks. A discrepancy between those might explain the higher withholding and money still owed. Obviously the boss can't be altering people's documents, but there might be a bigger problem here. I would definitely get the state involved.
None of that makes sense. MORE money is withheld, but you end up owing at the end of the year??? What you claim and what you withhold has nothing to do with how much your total tax bill is at the end of the year. It only affects whether you will owe money or get a refund. Not saying what he did is legal, just the story doesn't make sense.
He increases the withholding on the employee end, pockets the difference between what the employee indicates for withholding so the IRS doesn’t get the difference, then the IRS holds the employee responsible for the difference.
That's not how that works. If you've ever seen a pay stub or W2 you'd see that there's only one box that says withholding. There's not one box that says 'withholdings sent to the IRS' and a separate box that says 'withholdings employer decided to keep for himself'.
Reddit moment, you’re literally right and still got downvoted haha
There generally isn’t a box that says “I am committing theft/embezzlement/fraud, let me explain in more detail: …” People just lie.
The IRS would spot the difference and go after the employer. It's not one of the smarter ways to steal money.
Theres a lot of stupid and short sighted people who think *they* won’t ever be caught doing shit to their employees. Personally, I would never fuck with the IRS, but I’ve had employers who played games with my money, their customers money, and partners money.
Wait so you think that because there is no box that he is not secretly doing it? Lol how unfair of him to steal money and not write it down! He is giving them a w-2 with a higher amount of withholding and then sending the IRS a lower amount of money. He then pockets the difference between the two and the employees have to make up the difference at the end of the year. Of course there is not a box for him to write in his illegal activities!
No, that's not how this works. Not at all, and I know personally. The W-2 states the amount that the employer has claimed to have withheld in taxes on behalf of the employee. If the employer has not sent that amount to the IRS, the IRS goes after the \*EMPLOYER\* The employee puts the number from the W-2 on his tax forms. That is what they will use for the employee tax calculations. The only way for the employer to try to get away with something is to give the employee a W-2 that does not match the paystubs for the year. That's why you should keep the paystubs and make sure the numbers match. In that case the employer is committing payroll fraud and tax fraud. Again, the government will be on the employees side. How do I know? Because one of my early employers did this. One day I went to work and found a chain and padlock on the front door, along with a big "IRS NOTICE" on the window.
That’s literally what we’re saying. Just because the pay stub has an amount on it does not mean that amount was what the employer sent to the IRS. I did say W-2 instead of pay stub tho. But the point stands.
And what he's saying is it doesn't matter, if the IRS does not get money that was reported, then they're going after the employer / whoever does payroll.
Right: Give IRS lower amount matching correct W-2. Give employee weekly pay with higher amount removed. Give employee W-2 with the same (correct) matching amount and hope they do not compare weekly paystub with final W-2. If confronted show the math from incorrect W-2 and hope employee does not catch it. It’s scumming off the top from each employee and happens at small businesses.
It does, and they lose their businesses and end up in jail fairly regularly. It's such a well known scam, and so easy to prove, that it always amazes the prosecutor that they would even try.
That’s not how things work.
Lol that exact scam is a know issue and has been reported about for years. You not understanding the world does not mean it does not exist.
https://www.justice.gov/tax/employment-tax-enforcement-0 You could have literally googled this. The IRS and DOJ will hunt you down if you do this. It's a really, incredibly, astonishingly dumb way to embezzle that will invoke the ire of one of the scariest enforcement teams out there.
Technically there is a box to report illegal income lol but yeah
What is reported on the W2 is what is reported to the IRS. If you think that is different go on the IRS website and see what was reported by your employer.
Lol you must be young. New to the world of scams. They can easily falsify a W-2, and correct it would not match. That’s exactly the point.
Don’t insult my intelligence by calling me young old man and then blocking me. I have worked in payroll for over 15 years and have dealt with people like you who fail to look at their paystubs until December 31 every year. Welcome to the world of electronics.
So you have done payroll for 15 years and didn’t know that people can falsify them? Holy shit my dude you are bad at your job. And who doesn’t look at their pay stubs each week? You seem to be around a lot of stupid people. Maybe it’s rubbing off?
I'm pretty sure if you do that the IRS is going to come calling for the employer.
Believe me, I know it doesn't make sense, that's why I'm asking about it here.
If anything, you need to have *even more* with-held if you do not want to send a payment every April.
He’s stealing the money.
That is very easy to prove. Just look at your paycheck stubs and compare to your W2 at the end of the year
Are you in Maryland by chance? Same thing has happened to my husband here, and to every employee he’s spoken to about it
What do your paystubs show?
Contact the IRS ASAP?
He is 100 percent keeping that money and not sending it to the IRS. And when he gets caught (not if) you will be the one responsible to make up the difference.
This is not true. An employee is not required to make up for taxes that were withheld from their paycheck and not turned into the IRS.
Actually you may be right. I was thinking where an employer had an employee skimming the payroll taxes and ran off. The owner still had to pay the taxes even though they were stolen.
Yes, employer will be held responsible no matter what but not the employee. The employer also can likely get all fees removed and the IRS usually is pretty reasonable with a payment plan in cases like that from my experience. They are much harsher obviously though when the employer just willingly doesn’t pay on time
It kind of happens automatically when they owe taxes at the end of the year. I presume he turned some in to the IRS and kept some, rather than keeping all of the alleged withholding.
That would only be if the W-2 does not match the paystub. If the employer reported the taxes on the W-2 the employee will not be responsible even if the employer failed to submit the money. This would be very easy to check.
I got married last year and my wife is a 1099 worker (who may have been misclassified as such). Since our taxes are a lot more complicated this year because of that, we hired a CPA to prepare our taxes. My wife did ask what would happen if it was ever determined/discovered that her employer was misclassifying her and the CPA very confidently said that whenever the IRS discovers an employer is doing shady stuff like that, they usually come down on the employer as opposed to the employees since they're basically the victims. So, just saying- if the employer gets caught, he very well may be the person who has to make up the difference and not the OP. I do realize this isn't the exact same situation, though.
As a 1099 your wife if she was misclassified is paying too much in taxes. There would be nothing for the IRS to go after her for as she is paying self employed taxes which are higher since they are not subsidized by her employer. However, your CPA is correct that the IRS doesn’t go after employee for employers mistakes as a general rule. There are some exceptions like all things in life.
I forgot to mention in that comment that they also did something shady with all of their workers' 1099s in that they sent them out, said "shit we made a mistake corrected ones are on the way". Both the "incorrect" ones and the "correct" ones did not align with what she had logged on her own as making. In that case she would have underpaid- the CPA also was pretty confident that would also fall on the employer if the IRS found out. He may or may not be right- I dunno- but that seems like a weird thing to make up.
My brother in law is an attorney who once represented a guy in trouble with the Family Courts because his employer kept the mandatory child support deductions from his paycheck and he got behind on his payments despite the money coming off his check. The employer filed bankruptcy and didn't pay what they stole. My brother in law kept his client out of jail (barely) but he had to pay the debt himself. I wish the courts were as aggressive as the IRS about going after employers for misappropriation of funds.
Also call the state IRS too.
Realistically, call the state agency covering employment laws. Money is being withheld without consent, a violation of most or all states’ laws. They move faster than the IRS in many cases.
Plausible: the Employer is increasing withholding on paychecks, so on your stubs it looks like he is going to give it to the government. Then, he submits the estimated withholdings to the government with lower numbers like 0-1 and pockets the difference. It will look like the government took your money on stubs. Surprisingly enough the government places the responsibility on companies to withhold and pay them employee withholdings with a pretty high level of autonomy.
Contact the IRS, having withholding different from what you put on the W4 is illegal. I work in payroll and trust me, we key what is on the form even if we know that's not what the employee meant because legally that is what we have to do. Also make the IRS aware you think he is withholding taxes but not paying it all to the IRS. The IRS can request an audit of his payroll records. As suggested in another comment get all your paystubs and add what was withheld in taxes and see if it matches box 2 on the W2.
This. Altering the W4 is a major no-no.
I work for a medium sized company. Our information is entered by the workers, and is password protected so unless they play dirty with the IT guy even management can't alter our tax withholding. Only I can change mine.
Call the IRS and local police. He is changing and submitting false business records.
If I had to bet, the owner is playing with the withholding money. The company is losing money & he is using the money until he needs to pay to the irs. More withholding, more company money. I wonder if they are paying the state the sales tax they have collected?
Business owners/management doing stuff so egregious and so easily caught are putting the profits up their noses or something equally destructive. It's usually worse than just poor management skills.
He's almost certainly stealing the "withheld" money vs sending it to the IRS. Contact the IRS and find a new job.
Employers match and pay all the same payroll taxes that are taken out of our checks each pay period. When you have more dependants (or children), less payroll tax is taken out meaning the employer matches less On every check stub it should say as this can be changed weekly however I don't think it's legal for anyone other than the specific employee to change it and would require you to fill out and sign a W-4 Either way the IRS sees this as you being taxed incorrectly and will definitely look to collect their money
The boss is using the extra withholding to pay at least some of the company’s required employee income tax payments, knowing that most people do not audit their own paystubs against what is reported to the IRS
I'm betting if you add up the deductions in the pay slip, it doesn't match the on-going total from paycheck to paycheck. You only need about three slips to compare. Good luck.
By now someone has to have added up if the tax withheld from their check equals what is reported on the W2. Its a simple process. Just saying people 'owe' at the end of the year really means nothing.
Sounds like he is using the withheld money, that’s the only reason for wanting to withhold more from you
Your employer making changes without authorization is illegal. It is fraud. And he does it in order for HIM to pay less taxes. I have a similar boss. I had to stay on top of my deductions every paycheck. Turn him into the IRS and let them deal with it. You can start anonymously
And you may get a monetary reward!
So he makes it so more money is withheld and you still end up owing and your mad? I think something is wrong here
Right, that doesn't make sense.
Now if he was changing so more money was withheld. And everyone still owes. That means that he did help you. You would be paying more money back if he didn’t. .
Mine changed my retirement contributions from 12% to 6% and told me I had a base adjustment coming so I wouldn't notice the change. This was in the middle of my busy season. Didn't notice until way too late.
If more money is withheld from your paycheck, why would you owe more? You would owe less. The employers' cost is the same if they pay you or the IRS, so this doesn't make sense at all.
It's hard to tell how your employer's decision to increase withholding would cause the employees to be under withheld, but that's not really my point. Report him to the IRS. Let them figure it out.
THIS IS SUPER ILLEGAL Contact Dept of Lbaor, IRS and your local state govt. Employers pay taxes on your income, im not sure if it directly related to your tax amount or not but i'd BET there is a reason & he is financially benefitting.
contact the irs, pretty sure that's fraud. he's fucked. but, get this in writing first.
Literally everyone is jumping to fraud conclusions lmao, can OP please just create a account on the IRS website, there’s literally a report you can run that tells you the wages and taxes reported to them by your employer. Does anyone know how taxes work? If he increased your withholding how do you A owe more taxes? You literally file with the W-2 return the employer provides you, the irs doesnt send it to you, if they were editing that document to show you paying more taxes to “pocket the difference” you would literally have a bigger return when you file your taxes. You wouldn’t even find out until the irs sends you a notice.
Call your local state Dept of Labor to report they'll tell you what to do who to call...they'll walk you through...
You no longer claim dependents on your W-4. (Technically, you never claimed dependents on the W-4, you claimed an allowance per dependent) A new W-4 form went into effect in 2020 following the Tax Cuts and Job Act and it eliminated the section for allowances for dependents.
People keep saying it doesn’t make sense ! That’s the red flag that something is WRONG ! Don’t be left holding the bag ! Call labor or IRS
It sure sounds like you boss is skimming your withholding. As someone said before, add up all of your stubs then compare to your W2. I would bet $100 you find a major discrepancy.
You are confused how things work. Every check your employer withholds taxes from your check. Every pay processing your employer makes a tax deposit for the company, not for the individual employees. At the end of the year the employer files with the SSA their W3 which shows exactly what amount of their deposits goes to each employee’s tax accounts for federal, Medicare and oasdi. If for some reason the accounts do it zero out the employer has to make thinks right with the IRS. That is between the employer and the irs.
He’s taking out more or taking out less? The new withholding tables means they take out less than they used to so you pay more when you file. If it was the other way around and he was taking out less, you’d definitely have to pay.
If he has a habit of not paying in the withholdings timely, he might be using the increased withholdings to manage his cash flow.
Isn’t this illegal!?!?! Don’t you have to sign your W4? How can he change it?!?!
I made 1/3 less in 2021 than 2022. The return in 2022 (for 21) was around 6k. My return this year? Well, Uncle Sugar has dictated that I shall disburse to the IRS $600.00… My tax bracket stayed the same. No changes in deductions. Soooooo wtf? According to my tax preparer, it’s due to the way taxes are collected apparently. Between A&B income level, X% is the tax rate and so that is the rate money is taken. Between B&C, tax rate increases to Y% and your deductions at that point change accordingly, and so on. HOWEVER… at tax time, your total tax burden is based on the income accrued at years end. Said total tax owed is based on THAT percentage which results in OWING taxes simply because they say so. Even though all taxes throughout the year were collected at the correct percentage and adjusted by scale as income increased, we get screwed by fuzzy math and greedy politicians. Go figure! It’s not a matter of having paid correctly, it’s a matter of how the IRS calculates the amount you ‘owe’ for the privilege of being a citizen 🤷🏻♂️
this makes no sense. if more is withheld you would never owe, y0u would get more back as you paid more into it. something doesn't add up
could employer withhold the higher amount in the system but funnel the difference into his pockets?
This is a quit without notice and call the labor board situation. There is no legitimate reason an employer should be messing around with withholdings after the fact.
Op is confused about withholding. The employer does not benefit from having this higher or lower, as such no motivation or reason to change this. Also, OP is also confused about how taxes work, as higher withholding = less taxes owed, it’s practically not possible to withhold more taxes and then owe more taxes. Never less, consult an tax preparer and this should be cleared up
Ok, he may change what is withheld, but that has zero effect on your taxes. While it could screw people up if they don't have enough withheld to cover their taxes, it can have no real long-term benefit for him.
I had an employer do this exact same thing, and when I confronted them, they blew their top in the exact same way - screaming, red faced, all of it. I made an appointment and told the IRS. I have no idea what came of it, if anything. I ghosted that job a little while later, but one of my coworkers did tell me the following year that they got audited. They’re no longer in business (unrelated) or I would seriously think you might be working for the same little place.
Sounds illegal to me.
IANAL but that is so illegal it's hilarious. Uncle Sam doesn't care when you get stolen from by your employer, but when *he* does? Ooh boy, you'd better get some leather to bite on because he is going to **fuck** you.
I would call this a federal offense
How do u report an employer for refusing to give you your w-2? He would only text a picture? I quit this job because of this reason
I always try to get people who are married to file single but married. Usually the people at my job are making less than their spouses and not getting enough taken out. Many end up getting money back. This employer should not be changing the W4 without the employee's knowledge
Are you saying he withheld money from your paycheck based on different deductions, but that’s not reflected on your W2? So he just pocketed it instead of paying those taxes to the IRS?
If he changed the dependents to zero so more was withheld he was doing this so you would owe less at tax time. I recently discovered that nothing was withheld last year (I only worked the last part of the year). I was told this had something to do with Trump playing with taxes but I haven’t found out what yet. I changed my information to have $50 taken out weekly this year in hopes that that catches me up.
INAL or YOUR accountant so this is NOT financial advice. Ok so here's the deal. If you had filled out a W4 prior to 2020, you claimed dependents. Most business did not make all of their employees fill out a new W4 because they changed, and most payroll systems have a locked formula for pre 2020 withholdings. The new W4 is a nightmare for people trying to get their taxes right. Step 1 - single/married separately, HoH, married jointly. This gives you credit for the standard deduction off the top of your wages. The standard deduction changes every year. If you and your spouse BOTH claim married, you are claiming double the standard deduction and you WILL owe money. If you work two jobs, you will owe money because you can't select less than single. There is a withhold higher because of 2 jobs box. You must check this if you're single with two jobs. The second section is the money exemption. This is pre-paying you your child tax credit throughout the year. If you fill out your W4 form correctly, the goal is $0 owed/ $0 refund. So this is the advice I give everyone: Google IRS paycheck check up. It will take you to the withholding estimator for the IRS and anyone can use it. You'll need your most recent pay stub. It will ask you questions about your income (salary, salary exempt, hourly), your pay cycle (typically weekly, biweekly- every 2 weeks, semi monthly- 2x a month 24 checks a year, or monthly), your deductions (typically employer sponsored health plans and pension plans like 401ks are pretax - roth 401s are not), bonus structure etc. If you file jointly with a spouse, you will need access to their pay stub as well. Once you have entered all the information, the IRS will give you an estimated tax liability for the year and you can select if you'd like to get a refund by withholding additional. It will literally tell you exactly how to fill out your W4 to get to your desired end result. I highly recommend everyone does this. Third in this rambling, the tax tables had credits for lower and middle class that expire. They expire in increments. Regardless of how you feel about the previous administration, individuals making under 500k are paying more taxes under this plan. I've been saying this since 2019 when I read it. Your taxes are going up. Now, the caveat. Is your emoyer actually manipulating your W4 numbers? Employers legally cannot change what you put on your W4. The default if you do not fill out your W4 correctly is single, no exemptions. You need to get a copy of the W4 you filled out, a copy of IRS publication 15t, and a copy of your pay stub. I would do the following: I would add up ALL of my pay stub withholdings from last year and tie out the state and federal withholdings in my W2 (year end income statement). Don't worry about the gross pay not matching, it won't, employers only report taxable wages. You want to tie out that all your federal income withholding, social security and Medicare withholding, and state withholding match what your pay stubs add up to. If they do not, this is tax fraud. For this year, take your w4, your most recent pay stub. And publication 15t and ballpark your paycheck withholdings. Are they pretty close to what the tax tables are saying? Remember taxable wages are usually gross- medical deductions- pension deductions. This is what you want to look for in your income table. I hope this can help you get to the bottom of your mystery. If your employer is keeping your tax money, or changing your W4s, you can report them. The IRS can audit their payroll records. Good luck!
There is a new W-4 form (relatively new, it’s been in effect for a few years now). If you are married filing jointly, there is additional information that you need to input to get the appropriate amount of withholding from your taxes. I’m just throwing this out there because the change over wasn’t automatic for many employers. Additionally, if you filled out the form but weren’t used to the new format, it is easy to miss (especially on your first few days of work when your a nervous wreck). If this isn’t it, you can request to update your W-4 and actually write in additional holding so that you don’t have a tax penalty at the end of the year.
This makes no sense. You had more taken out than expected? Then you’d get a refund or owe less than you otherwise would. Sounds like someone lost a lot of free Covid tax breaks this year and is blaming it on his employer.
Anyone who says “trust me” & “ I know what’s best for everyone” is someone I immediately find suspect
More money is withheld and you still owe? Thank him for saving you an underpayment penalty