Employer deduction error

[murphree1960]

What is the name of your state (only U.S. law)?

My employer failed to withhold pre-tax funds to be allocated to my Flexible Spending Account in 2012. I did not catch the error because I rarely look at my payroll stub and the fact that we have direct deposit. I am an hourly employee and sometimes I have overtime and sometimes not. Therefore I never noticed a difference in my take home pay. I did look at my payroll stub in January, 2012, at the beginning of the year and the FSA was being deducted. My “Benny” card was loaded with the $2500.00 that I had elected and could log in online to the Flex Spending Account website and periodically see my transactions. Everything looked as it should.


I realized this was not coming out of my bi-weekly check in December 2012 when I was looking over my deductions on my last check stub for 2012, getting ready to complete the paperwork for the FSA year 2013.
I had elected $2500.00 for 2012 year and $2000.00 for 2013 year.
Come to find out there were only 2 deductions taken out of my check which were the first 2 payroll checks for 2012 and then the deductions just stopped. I agree that the money should be paid back.

Here’s the problem… Payroll is currently deducting for the year 2012 and the year 2013 and both are being taken out of my paycheck and titled FSA. With the W-2 I just received for 2012, it has only the 2 FSA amounts ($192.30) that were taken out of my pay check for the 2012 year. ($2500.00 divided by 26 weeks times 2)
When I receive my W-2 for 2013, it will show a total amount of $4307.70 taken out. (2,307.70 + $2000.00) The IRS only allows $2500.00 per year. I won’t be getting the tax break for 2012 when I file my taxes plus I will only get a $2500.00 tax break for 2013.

This problem makes me furious by no means and only see 2 solutions but would like more advice on the right way this should be handled. It was my self and one other employee that this happened to.

Scenario 1: Have payroll give me a corrected W-2 form for 2012 showing the $2500.00 and still collect from me for it. I’ve been at this company for 15 years and I am not going anywhere.

Scenario 2: Figure what my tax liability would be with and without the corrected W-2 form, have my company credit me for the difference by crediting from what I am currently paying back for the 2012 plan.

I just need and idea if this is the correct way to handle things on my part and my employer's part.

 

[cbg]

I'll let someone who works with Payroll address the W-2 part of your question but I did not catch the error because I rarely look at my payroll stub and the fact that we have direct deposit. I am an hourly employee and sometimes I have overtime and sometimes not. Therefore I never noticed a difference in my take home pay. is no excuse. It is your responsibility to check your paystubs and ensure that the correct deductions are being taken.

 

[murphree1960]

I tend to disagree with you cbg for the fact being there are highly paid Payroll Administrators that should be looking about for the good of the company. There was a descrepancy in the "accounting" portion of this error but instead of a "highly paid" accountant investigating this difference (remember, we are talking about close to $5,000.00 difference and 2 employees this happened to) on the books, they just scrugged it off as "well, maybe someone used up all their Flex monies the first month it was avaliable". None of that washes with me.

 

[swalsh411]

Payroll should withhold both the 2012 and 2013 plan year amounts as pre-tax deductions spaced out over the rest of the year then issue you a 2012 W2-C once the entire amount has been withheld. If you have not already filed for 2012, you can file for an extension on your 2012 taxes. Be sure to make an estimated payment if you think you will owe because the extension does not remove interest on taxes that would have been due April 15.

It would not be proper to issue you a W2-C until the full amount of the 2012 deductions have been collected because you could be terminated for any reason. Nobody can 100% guaruntee you will continue to work there until the end of the year.

 

[murphree1960]

Thank you swalsh411. I do like this solution. It sounds more "legal" than anything I have thought of. I am just not sure if our payroll department would go for it. I have not filed my individual income taxes for the year 2012. I did a quick draft and it seems that even as a surprise to me, I would be getting approximately $1,000.00 back from the IRS. Could I file my 2012 taxes as my W-2 is now, and at the end of the year, get a W2-C in December 2012 and do an ammended 2012 tax return? Wouldn't I still be getting money back from this ammended 2012 return because it would now show the $2307.70 as FSA whereas my original W-2 form did not? Then also file my return for 2013 with that year's $2000.00 FSA with my 2013 W-2 form. That way I would get the tax benefit for both 2012 and 2013.

 

[cbg]

You are free to disagree if you choose to, but try taking your argument into court and see how far "I didn't check my pay stub or my pay deductions because it's not my job to check my deductions - Payroll ought to be continually auditing all accounts so that I don't need to spend six seconds checking my own" will get you.

 

[tranquility]

Highly paid Payroll Administrators just make sure they can draw a double line under all the numbers. They don't check to see each person is getting the number they should. That tends to be the job of others who review the highly paid Payroll Administrators work. And, THOSE people tend to look for gross amounts, not all the calculations. It is said that the most "audited" accounting function is payroll. People look at their pays tubs every week. It strains credulity a person would be getting far more or less than they should would not be aware to it. While that would not change the underlying problem legally, it does affect the equities of the situation.

I don't know all the facts or how I would account for this, changing payroll in regards to an FSA between years is going to be more than sending in a corrected form. Money will be involved too. Depending on all the facts (not just the OP's) the company could be out some money. Is that the OP's fault? Not legally; but gosh golly gee it would have been super if he mentioned his over payment before it was caught in a true audit or after someone else noticed it for some reason far later.

The bottom line is the OP is right, he should get proper accounting and pay things back with pretax dollars. That's not going to happen. The cost would be to great if it could be done at all. More likely, the company will reduce the payback or throw in some money themselves to take care of the tax issue. Sure, if it went to court we might figure the interest on the money wrongly available to the OP and reduce the tax hit, but this is not getting to there. I think I'd make the same offer as the company. If the OP insisted on more, I'd probably pay a reasonable amount to make it like pretax money paid it back and then inform him we will no longer require his services.

 

[murphree1960]

Your point has been taken into consideration cbg.

 

[Bjk]

My employer is refusing to issue a corrected W2 reflecting a reduction in my salary per a redirection agreement for health insurance premiums. Payroll simply didn't check the box in their system for pre-tax and for the past two years I and 17 other employees have been taxed on that deduction. All employees who have Aflac deductions have been taxed and not provided the pre-tax benefit. All W-2's for employees receiving health insurance pre-tax deductions were incorrectly reported on W2's for the past 11 years. It is being reported in box 12 with a code g. It is a county government and my best guess as to why they aren't willing to correct the errors is because it will be a red flag with the State Board of Accounts. I will be contacting both the IRS and state board of accounts today if my corrected W2 is not given to me today.

 

[murphree1960]

Bjk, stand your ground. Don't back down. When I need to know for sure if my taxes are being correctly calculated, as it is now, I use an online payroll calculator. That should be close if not exact.

 

[tranquility]

My employer is refusing to issue a corrected W2 reflecting a reduction in my salary per a redirection agreement for health insurance premiums. Payroll simply didn't check the box in their system for pre-tax and for the past two years I and 17 other employees have been taxed on that deduction. All employees who have Aflac deductions have been taxed and not provided the pre-tax benefit. All W-2's for employees receiving health insurance pre-tax deductions were incorrectly reported on W2's for the past 11 years. It is being reported in box 12 with a code g. It is a county government and my best guess as to why they aren't willing to correct the errors is because it will be a red flag with the State Board of Accounts. I will be contacting both the IRS and state board of accounts today if my corrected W2 is not given to me today.

Start your own thread. Also, feel free to contact the IRS and state board. Since that would not be a protected issue, prepare to be fired.

 

[Bjk]

I won't be fired, I am an elected official.

 

[Just Blue]

I won't be fired, I am an elected official.

Poor people of your city/town.

 

[swalsh411]

I have advice for you but you need to start your own thread.

 

[tranquility]

I won't be fired, I am an elected official.

An elected official who knows so little about taxes he didn't catch an obvious error for 11 years?

The country is in safe hands.