money taken from paychecks without notice

What is the name of your state? Texas

At my office we have a rewards program. Much like a rewards program on a credit card. In which, we are able to earn points and redeem them for merchandise.

So today is payday and the company sent out an e-mail this morning informing us that any items redeemed will be taxed, and the amount of these taxes will be automatically deducted from our paycheck. Yeah, thanks for the advanced warning, right?

Well, we all get our paychecks (there is approximately 50 of us in the office), and we are all shorted on pay. Some people are missing as little as $80, and some are missing as much as $900+.

No one signed anything giving authorization for these deductions to be taken. There was never any information made clear that we would have to pay the taxes on these items. The company says that the information was on the company rewards website, which has been conveniently taken down.

We recieved no warning and no information that these monies would be taken from us.

Surely there is some legal action that can be taken.

Any help?

Um, I hate to tell you this, but you don't have to sign an authorization for an employer to take taxes out.

It's entirely possible that the employer had no option. Patty will be able to tell you more than I can, but what items can legally be non-taxable to the employee are EXTREMELY limited.

Granted, they didn't do a very good job of explaining. But if they are required by law to take taxes, they are required by law to take taxes, whether they gave you advance notice or not.

i could be mistaken, but arent Fringe Benefit Taxes required to be payed by the employer?
not the emplyee?

You'll have to wait for Patty on that one. She's the payroll expert.

There are several fringe benefits that do require the employee to pay taxes, such as a company car or car allowance, certain levels of life insurance, and country club dues. I am not sure of all the particulars as it has been many years since I've had to do a year-end payroll (as cbg said, wait for pattytx to come by...she'll know), but it does sound to me like the program you describe would have some tax ramifications for the employee. And as cbg also correctly pointed out, your employer doesn't have to get your permission to deduct taxes.

I agree their communication was poor, but I don't think there's anything you can do about it.

ok thanks
i'll be checking back periodically

Uh-oh, I heard my name being mentioned in vain

OK, the company is absolutely correct that the value of the merchandise redeemed is taxable income. This is an awards/incentive program that does not qualify as a de minimus fringe benefit; the taxability of the value of the merchandise is no different than if you had been given the cash instead.

I contribute to other forums, some specifically payroll-related and there are always questions near year-end about trying to find some way to make such awards, prizes, gift certificates, etc. nontaxable. Generally speaking, the answer is nearly always, "yes, it is taxable". And actually, there is no taxable fringe benefit where the company is required to pay the employee's share of the applicable taxes. Some companies do, some don't; it's at the employer's discretion. It is possible that the payroll person didn't know any better until just now (lots of them don't).

I do agree that this should have been communicated to you beforehand, or even via a notice attached to the check. But the only thing that would mean is you would have known earlier; it doesn't change the tax requirements.

Can you suggest to whoever is in charge of payroll that it would be helpful if these redemptions were at least recorded and taxed as they occur? At least you wouldn't get hit all at once.

The employer may have been lax on communication, but they have done nothing illegal. In fact, it would have been a violation of tax law if they hadn't reported this income.

ok
thank you for clarifying

i'll be sure to relay this info to my co-workers