OT: about Fed and State w/holdings

[JennyDarling]

I work in the home office of a small restaurant chain. Payroll numbers for the 11 restaurants I oversee came in today and my boss is livid because one of the stores has a much higher than usual taxpay.

I spent a few minutes going over the payroll reports and quickly realized that the difference was not in the empoyer contribution but in employee withholdings. It seems several people changed there withholding status to single 0 to have the maximum withheld and 1 person is having an extra $50 in federal taken out to ensure a bigger refund. I, personally, hate giving the government an interest free loan but to each there own, I suppose.

My boss (the president of the company) wants me to send out a company wide memo that every employee must claim at least single 1. Here's my question: can he even do that? Seems like it should be illegal.

Maybe he will cool off soon and change his mind but I need to be able to argue this point if not.

HELP!

 

[Schachteles]

This is what my DH said and he is a tax and payroll manager:

No he cannot, the employee dictates what needs to be withheld from their check via the W-4. If you are audited the IRS will check to see if you are withholding according to that document and the employer could pay huge fines if not.

Regardless of the tax liability going to the federal government, the Social Security and Medicare are flat rates and do not change when changing what an employee is claiming.

As for the federal withholding amount, changing the amount of federal withholding is irrelevant and will not decrease the overall employer’s payroll liability. The employer either has to pay that amount out to the employee in the form of net or to the IRS in the form of withholding taxes. The liability amount is still the same, it is a matter of where it goes.

I can provide an example if necessary.

 

[bumbershoot]

I'm not an expert, but wow I really do NOT think he gets to have a say in this at all.

What's his problem with it, though? The people want to send more to the IRS instead of to themselves...exact same $ out for the owner, right? In our case, we have a ridiculous number on that form, so we get the max in our paycheck (hubby is actually astonished and embarrassed at how many we have on the form, and we still get a refund, which we do NOT want to get...he's resisting going even higher but I do NOT want a refund, I'd rather save up and pay in April!)...and the employer doesn't say a thing, and I don't think they have the right to say anything.

 

[kymmyk13]

This is what my DH said and he is a tax and payroll manager:

No he cannot, the employee dictates what needs to be withheld from their check via the W-4. If you are audited the IRS will check to see if you are withholding according to that document and the employer could pay huge fines if not.

Regardless of the tax liability going to the federal government, the Social Security and Medicare are flat rates and do not change when changing what an employee is claiming.

As for the federal withholding amount, changing the amount of federal withholding is irrelevant and will not decrease the overall employer’s payroll liability. The employer either has to pay that amount out to the employee in the form of net or to the IRS in the form of withholding taxes. The liability amount is still the same, it is a matter of where it goes.

I can provide an example if necessary.

agreed. I do payroll for my company and the amount the business pays out of pocket has nothing to do with the withholding. you are paying more for the payments but it is coming from the employees paycheck not from the business.

 

[laurafergie]

This is what my DH said and he is a tax and payroll manager:

No he cannot, the employee dictates what needs to be withheld from their check via the W-4. If you are audited the IRS will check to see if you are withholding according to that document and the employer could pay huge fines if not.

Regardless of the tax liability going to the federal government, the Social Security and Medicare are flat rates and do not change when changing what an employee is claiming.

As for the federal withholding amount, changing the amount of federal withholding is irrelevant and will not decrease the overall employer’s payroll liability. The employer either has to pay that amount out to the employee in the form of net or to the IRS in the form of withholding taxes. The liability amount is still the same, it is a matter of where it goes.

I can provide an example if necessary.

Exactly. Your boss needs to get a clue. The money is the same - it's just going to the Feds instead of the employees. An employer may NOT dictate to the employee how to fill out the W-4.

ETA: I found the link explaining the only time the employer can override the employee's wishes regarding the W-4.

http://www.irs.gov/publications/p919/ar02.html#en_US_publink1000233674

Quote:
IRS Review of Your Withholding

Generally, the amount your employer withholds for federal income tax must be based on your Form W-4. However, whether you are entitled to claim exempt status or a certain number of withholding allowances is subject to review by the IRS. If the IRS determines that you cannot claim more than a specified number of withholding allowances or claim a complete exemption from withholding, the IRS will issue a notice of the maximum number of withholding allowances permitted (commonly referred to as a “lock-in letter”) to both you and your employer.

If you receive a lock-in letter, the IRS has instructed your employer to begin withholding income tax from your wages based on the withholding rate (marital status) and maximum number of allowances specified in the letter. In addition, your employer has been instructed not to honor your current Form W-4 or a new Form W-4 unless it results in more withholding than the lock-in letter allows.

The IRS will provide a period of time during which you can dispute the determination before your employer adjusts your withholding. Follow the instructions in your letter if you wish to submit a new Form W-4 or contact the Withholding Compliance Unit with questions. Additional information is available on the IRS website at www.irs.gov. Enter “withholding compliance questions” (in quotation marks) in the search box.

 

[JennyDarling]

Thanks for the quick responses guys. I knew there could be no possible way that he could dictate that.

As for why he cares it's pretty simple and really silly: Our payroll company debits our tax pay on Friday afternoon from each stores operating account. Saturday is payday so the payroll accounts don't have to be funded until Monday morning.

Even though that Friday debit is money that was (partially at least) w/held employee pay he just likes it to be low.

Ugh...bosses.

 

[scrapquitler]

I work in the home office of a small restaurant chain. Payroll numbers for the 11 restaurants I oversee came in today and my boss is livid because one of the stores has a much higher than usual taxpay.

I spent a few minutes going over the payroll reports and quickly realized that the difference was not in the empoyer contribution but in employee withholdings. It seems several people changed there withholding status to single 0 to have the maximum withheld and 1 person is having an extra $50 in federal taken out to ensure a bigger refund. I, personally, hate giving the government an interest free loan but to each there own, I suppose.

My boss (the president of the company) wants me to send out a company wide memo that every employee must claim at least single 1. Here's my question: can he even do that? Seems like it should be illegal.

Maybe he will cool off soon and change his mind but I need to be able to argue this point if not.

HELP!

I doubt it. It is perfectly legal for the employee to have extra withheld every pay period, and it is legal for them to claim 0 if they want. And why is he 'livid' that the tax payment is bigger for that store? It's not like it is the company's money...it is money of the EMPLOYEES that the business is simply supposed to forward to the government. The business is supposed to be setting this money aside specifically for the purpose of paying the quarterly (or whatever basis you use) payments to the Feds/State.

 

[MomToOne]

I would tell your boss that you are uncomfortable sending out any such memo because you are not sure of the legalities involved, and if he insists on doing it, he needs to have his tax attorney write the letter.

 

[Cheshire Figment]

I agree with all of the above comments.

If he is using a payroll service, they are taking out the gross employee payroll plus the employer share of taxes. The employer share of withholdings is zero! The payroll taxes on an employer are only FICA (Social Security), Medicare, and unemployment, and again these are based on the gross payroll.

Mike (CPA Retired)

 

[trip]

I, personally, hate giving the government an interest free loan but to each there own, I suppose.

I usually agree with this but with interest rates so low now, I doubt that it matters that much.

Last week on Suze Orman she even admitted that if you don't need the money or have trouble saving, it is all right to get the bigger refund.

 

[scrapquitler]

I usually agree with this but with interest rates so low now, I doubt that it matters that much.

Last week on Suze Orman she even admitted that if you don't need the money or have trouble saving, it is all right to get the bigger refund.

Well maybe, but what about if you live in California or one of the other states that issued IOUs instead of tax refunds last year? then you had to wait and wait and wait for that refund that you were counting on. THere's no guarantee that the Federal government or other states won't issue IOUs instead of refunds in the future...then they've got your money and you have to just wait until they decide to give it back to you.

I"d rather pay on APril 15th and have my money in my wallet until then.

 

[LadyBeBop]

I spent a few minutes going over the payroll reports and quickly realized that the difference was not in the empoyer contribution but in employee withholdings. It seems several people changed there withholding status to single 0 to have the maximum withheld and 1 person is having an extra $50 in federal taken out to ensure a bigger refund. I, personally, hate giving the government an interest free loan but to each there own, I suppose.

The employees might now even be getting a refund. They might have other sources of income that is not subject to withholding (interest and dividend, nonemployee compensation, etc). Sure, you can subject yourself to estimated payments, four times a year. However, this is easier.

Is this the first time this specific store had such high withholding. Since we are at the end of the year, some people adjust their withholding upwards at the end of the year if they know they'll owe a high amount of taxes come April 15th...including the estimated tax penalty. They'll adjust back to a reasonable level come January.

My boss (the president of the company) wants me to send out a company wide memo that every employee must claim at least single 1. Here's my question: can he even do that? Seems like it should be illegal.

It is.