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My employer did not withhold FICA taxes for Jan and Feb 2017

and at the time, they...
My employer did not withhold FICA taxes for Jan and Feb 2017 and at the time, they said I may have to pay taxes on this during tax season, but weren't 100% sure.Now, my employer got in touch with me and asked me what I want to do with the under withheld FICA taxes for jan/feb- 1) either handle it by myself after I get the W2 or 2) make a Q1 amendment in the system (in which case I have to pay a $425 fee to the Payroll software company to retroactively amend 941 taxes).the Payroll software company said they cannot add additional FICA taxes to my November/December 2017 payrolls as that will change tax calculations for the quarter.What should I do in this case? I really don't want to pay the fee. When I asked my employer about how they will handle it because they have to pay half, they said they will pay the ER portion of FICA taxes not withheld for Jan/Feb.
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10/24/2017
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,193
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

The problem is your employer's to fix. You should try to work this out with your employer, however see the below information regarding the law and regulations regarding this.

According to IRS Pub 15 (Circular E), Employer’s Tax Guide (page 33)

Collecting underwithheld taxes from employees.

If you withheld no income, social security, or Medicare taxes or less than the correct amount from an employee's wages, you can make it up from later pay to that employee. But you are the one who owes the underpayment. Reimbursement is a matter for settlement between you and the employee. Underwithheld income tax and Additional Medicare Tax must be recovered from the employee on or before the last day of the calendar year.

According to the IRS Tax Code:

“The employer is liable for the employee tax with respect to all wages paid by him to each of his employees whether or not it is collected from the employee. If, for example, the employer deducts less than the correct amount of tax, or if he fails to deduct any part of the tax, he is nevertheless liable for the correct amount of the tax. Until collected from him the employee also is liable for the employee tax with respect to all the wages received by him.”

My best advice would be to advise your employer to read Publication 15 (Circular E).

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 1 month ago
Hello,I showed my employer that and they said this:
"We will handle the filing and withholding and pay the ER portion but the fees for the correction is not our cost since I did not get notification from you in time to adjust your taxes.
I cannot adjust and withhold taxes correctly if I do not get the accurate info from the employees. I corrected and adjusted as soon as I was notified."The admin fee for changing my Q1 taxes is $425. Is there a way to go about this without paying the fee?

He does not have to adjust Q1 taxes because he will be collecting the amounts AFTER Q1. He just has to recover the amounts from you before 12/31/17.

"If you withheld no income, social security, or Medicare taxes or less than the correct amount from an employee's wages, you can make it up from later pay to that employee. But you are the one who owes the underpayment. Reimbursement is a matter for settlement between you and the employee. Underwithheld income tax and Additional Medicare Tax must be recovered from the employee on or before the last day of the calendar year."

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Nothing has to be corrected. He just has to withhold additional amounts from you to cover the amounts he did not withhold in Q1.

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Customer reply replied 1 month ago
Thats what I thought as well. I asked them whether they could add the Jan/Feb taxes to my November Payroll and I got the following response (this response was from a third party payroll company who is also charging the fee):"If you withhold the SS and Medicare in this quarter for Jan and Feb, this will throw the calculations off for the employee and the employer as these taxes have to be validated by Quarter. If you withheld these taxes this quarter, when you take his gross wages and times it by the SS and Medicare amount, it will show the employee and employer over for this quarter. So therefore, the taxes would need to be fixed in QT1 for this employee to be current for the year."Basically they're telling me to pay the $425 to amend Q1 or sort it out when I get the W2 from them and I guess pay the IRS my half of the FICA taxes during tax season?

Based on what you're telling me, I would just leave it alone, and pay whatever amount you owe when you file your tax return.

It does not seem right to charge you $425 for their mistake.

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Customer reply replied 1 month ago
Would that throw off the IRS because they wouldn't match the employers contributions to mine when I file?I knew that you could the IRS for an underpayment of income tax, but didn't know how it would work for an underpayment of FICA taxes, is it the same way?

You will have an underpayment for FICA from the information on your W-2. You will pay when you file.

It's not going to throw the IRS off because your employer didn't withhold FICA for those two months.

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Customer reply replied 1 month ago
I was researching about FICA tax returns and apparently I cannot file for a FICA tax payment to the IRS when I file. The payment only works for income tax- wanted to know if this was true?

If you use tax preparation software such as TurboTax, you will receive a message that the FICA withholding is less than what was required.

As I mentioned, it is your employer's responsibility to withhold the correct amount.

If you withheld no income, social security, or Medicare taxes or less than the correct amount from an employee's wages, you can make it up from later pay to that employee. But you are the one who owes the underpayment. Reimbursement is a matter for settlement between you and the employee. Underwithheld income tax and Additional Medicare Tax must be recovered from the employee on or before the last day of the calendar year.

According to the IRS Tax Code:

“The employer is liable for the employee tax with respect to all wages paid by him to each of his employees whether or not it is collected from the employee. If, for example, the employer deducts less than the correct amount of tax, or if he fails to deduct any part of the tax, he is nevertheless liable for the correct amount of the tax. Until collected from him the employee also is liable for the employee tax with respect to all the wages received by him.”

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Customer reply replied 1 month ago
Thanks- in their case their employer decided to retroactively correct previous years FICA taxes.My employer is telling me that I will have to pay the fee to amend their 941-X. Im just confused as to how my employer will handle this as they will have to file 941-X to pay their part of Jan/Feb taxes right?

That's correct, but as I mentioned, you should not have to pay for their mistake.

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Customer reply replied 1 month ago
Can my employer blame me for an underpayment because I did not warn them early enough (ie. beginning of my job vs 2 months in) when dealing with the IRS?Im just worried that if I don't pay my taxes, the IRS can hold it against me (since I will have future visa applications etc).

Your employer cannot blame you as it is their responsibility to withhold the taxes. Even if you did not give them enough notice, it is still their responsibility to correct the mistake--NOT YOURS.

At this point, please take a moment to rate my answers thus far since that is the only way I receive credit for answering you.

Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,193
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Barbara and 87 other Tax Specialists are ready to help you
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Customer reply replied 1 month ago
Thanks for the reply- I've left a rating.I just had a follow up question. Do you think it would be best to schedule a call with my company's HR and discuss with them what their thought process regarding paying for the ER portion of FICA is? And maybe work out something from there.Or just leave it up to them and the IRS?

Thank you for the positive rating. It is very much appreciated.

Yes. I would definitely schedule a call with your company's HR department just so they can explain their rationale to you. There is absolutely nothing wrong with trying to be informed about something that concerns you.

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Barbara
Barbara
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Category: Tax
Satisfied Customers: 4,193
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