If the payroll admin never deducts fed or state taxes from her check, is that legal-could it hurt the company?

Question

we make the same, and she takes out her medi and ss, but she zeros out any fed or state taxes on each paycheck. she claims married and 0, could the company get in trouble, or is it all on her if she gets audited? i feel she's creating a dummied W-2 at year end for herself? any input?

Answer 1

May be she is working as independent contractor.

Read this

http://taxipay.blogspot.com/2008/03/w2-o...

Answer 2

If what you say is true, a mistake is being made.  Unless she is in a different kind of job and it qualifies as statutory.  A statutory employee is supposed to have med and soc sec tax taken out but no income tax.  Statutory jobs are typically insurance salesmen and some delivery drivers.  But is she is in the same job as you and has declared 0 allowances on her W-4 something should be coming out unless she makes so little that she doesn't need anything taken out.

It won't hurt the company but she will end up owing taxes at the end of the year along with a penalty for underwithholding.

By the way, it is "all on her" even without an audit and making a dummy W-2 won't do any good.  The IRS gets a copy of everybody's W-2 and their computers do an automatic matching of the W-2s from employers to tax returns from employees.  So they WILL catch her, even without an audit.  And altering a tax document IS a crime, so she may have more problems than just taxes to pay.

Answer 3

How do you know all this?  

SHE is the one who will have problems at the end of the year, with no income tax taken out, not the company.  She'll owe the tax when she files her tax return, it will show up then.  She can't really create a dummy W-2 at the end of the year, since the total shown on the W-2's has to match the tax that was paid in for the year, and if she showed tax payments on her W-2, it wouldn't match

If she's actually paying the tax in to the feds but just not deducting it from her paychecks, then she's going to get caught when the end of year financial statements for the company don't balance.

Answer 4

It could be OK, if her income is low enough to not owe taxes.  She probably put a number of allowances on her W-4 to reduce her taxes to zero.  You are probably missing some information.

While the payroll dept may have made an error, they are not going to get in trouble for it, and she will owe and shortfall when she files her taxes.