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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4121
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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My employer failed to withhold social security tax for the

Resolved Question:

My employer failed to withhold social security tax for the last 6 months. I just noticed the error and informed my employer, who is now correctly withholding all my taxes. I am told I am responsible for paying the social security taxes owed for the last 6 months, but I have read that if they fail to withhold them, the employer is liable for them. Can you clarify and/or point me at a relevant source?
Submitted: 1 year ago.
Category: Tax
Expert:  Stephen G. replied 1 year ago.

Stephen G :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything that is not clear.

Stephen G :

How are they suggesting that you pay the taxes? To them, or with your tax return which will require you to report self-employment income.

Stephen G :

Did they give you a W2 for your work last year or a 1099-Misc?

Stephen G :

I don't see how they could have given you a W2 with no Social Security withholding reported on it.

Stephen G :

Whether responsible or not, if you were an employee, they would have had to pay 7.65% of your gross pay in Social Security & Medicare Tax and you would have had to pay 5.65% of your gross pay as your share. Those are the figures for 2012; For 2013, the Employer and the Employee both pay 7.65%.

Stephen G :

I guess the problem comes down to how much of an issue do you want to make of this; if your job could be at stake, perhaps you will want to just pay it.

Stephen G :

But I need the answers to those questions above in order to give you my thoughts.

Customer:

They have suggested that they will pay the taxes on my behalf and they will withhold a little extra every month to cover the cost (basically a no-interest loan for the full amount of unpaid taxes).

Customer:

I got a W-2 with a blank box for the social security taxes.

Customer:

(it's probably relevant to say I was ineligible for social security when I worked for them last year because of my visa, but I'm now here on a new contract and new visa and I must pay social security)

Customer:

As for how much of an issue I want to make, so far things are pretty amicable. We actually outsource the tax side of things to a third party, so it wouldn't be my actual employer who is out of pocket (if that makes sense).

Customer:

I'd like to do things correctly according to the law. If the IRS says the employer pays, then I would like them to pay. If they say I pay, then I will (grudgingly) pay. The no-interest loan aspect means that it won't be a huge burden for me, but enough of an inconvenience that I'm unhappy about it.

Customer:

Oh, and also I already filed my tax return for 2012. I realised the social security issue after I filed.

Customer:

(In case it isn't obvious, I'm from Europe - I'm not used to the American tax system!)

Stephen G :

Well, I don't how they can pay the back taxes for 2012 without amending their payroll tax returns. At least now it makes sense as to how it got screwed up. The thing about the Employer paying if they fail to withhold really just means that the IRS has the right to collect both shares from them if you don't pay your share. However, I don't understand why they expect you to pay both the Employer and Employee share of the Social Security & Medicare Tax. Had it been done correctly, you both would have paid based upon the percentages indicated above.

Stephen G :

The only thing I can think of is that they are saying it is your fault for not informing them that your were subject to the Social Security System in 2012. But irrespective of who's "fault" it was, you should pay your share & they should pay their share and they shouldn't be withholding their share from your pay. I'm pretty sure that isn't even legal (permitted) under the payroll rules & if you were to push it, they would wind up paying the whole thing plus penalties & interest.

Customer:

They're not asking me to pay their share. Only my own. Which I only have a problem with because it's a sudden tax bill that I wouldn't have got if they had computed the payroll right in the first place!

Stephen G :

The other aspect of this is that you should be getting credit for that Social Security Tax / Earnings in the period that you earned them; that could effect your benefits down the road.

Stephen G :

Do they use an outside payroll service?

Customer:

Yes. They use Trinet.

Stephen G :

I understand what you are saying, but never-the-less you would have owed the tax.

Customer:

I think they want to generate an amended W-2 that correctly reflects my SS tax. Then I will submit a form to the IRS to amend the tax return I already filed and I will owe a certain amount to the IRS which my employer will take care of and I will just pay them back in installments.

Stephen G :

You should find out exactly how they plan on making the correction; they should amend the returns for the periods affected and get your Social Security Earnings into the correct period;

Customer:

Based on what you're saying, that sounds like the right thing to do.

Stephen G :

You shouldn't have to amend your federal return; it won't make any difference.

Customer:

But if I have stated in my return that I paid no SS tax and they amend my W-2 to say that I did, won't I need to amend the return?

Stephen G :

They have to amend the payroll tax returns; it is a simple matter for the service bureau to do; when your W2 is corrected a copy of the corrected W2 goes to the Social Security Administration.

Stephen G :

The IRS doesn't care about the social security tax; just the income tax withholding.

Stephen G :

Unless you made over 110,000. in 2012; is that an issue?

Customer:

It is not. (But I wish it was!)

Stephen G :

Well I had to ask

Customer:

:)

Customer:

ok

Customer:

I think you've answered all the things I needed to know

Stephen G :

You see the SS withholding doesn't get entered on your tax return anywhere;

Customer:

Really?

Stephen G :

You would only have to amend your tax return if the corrected W2 changes you tax return.

Customer:

the web site I used had a field in one of the forms for entering SS and medicare tax withholding

Customer:

well, in any case, I think we can sort that out if it becomes an issue

Customer:

the key point is that I'm not trying to force my employer to pay my share of the tax!

Stephen G :

Yes, but it doesn't go anywhere; see if you can find the numbers on your 1040; if you can, I'll send you an ice cream cone :]

Customer:

:)

Stephen G :

You don't have to do anything except pay your share; take the corrected W2 (it will be marked "Corrected') & file it with your 2012 Tax workpapers.

Customer:

OK. Sounds great. Thanks so much for your help.

Stephen G :

Ok, U R welcome & come back if you need to go over it again down the road; just remember what I said; you don't want to file an amended return with no income tax change

Stephen G :

Please remember to rate my responses;

Customer:

Will do. It's been excellent. Thanks. Bye!

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4121
Experience: Extensive Experience with Tax, Financial & Estate Issues
Stephen G. and 4 other Tax Specialists are ready to help you

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Stephen G.
Stephen G.
Tax Professional
4121 Satisfied Customers
Extensive Experience with Tax, Financial & Estate Issues