Employer Asking Me to Pay Taxes Retroactively?

[Moralessk8]

California
I was getting paid under the table for two months (unbeknownst to me - I was told I was a 1099 contractor). My employer decided to do the right thing and retroactively report those payments to the IRS properly. I never withheld any portion of my pay for tax purposes. After not working for this employer for over a year, he’s asking me to reimburse him for the taxes withheld that he decided to pay (which should have been withheld from my check in the first place). Am I liable to pay him if I never agreed to such transaction?

 

[adjusterjack]

You were illegally working "under the table." Just as complicit as your employer. Ignorance of the law is no excuse.

Pay him back.

Then file tax returns for that income. Who knows, you may get part or all of that money back.

 

[quincy]

California
I was getting paid under the table for two months (unbeknownst to me - I was told I was a 1099 contractor). My employer decided to do the right thing and retroactively report those payments to the IRS properly. I never withheld any portion of my pay for tax purposes. After not working for this employer for over a year, he’s asking me to reimburse him for the taxes withheld that he decided to pay (which should have been withheld from my check in the first place). Am I liable to pay him if I never agreed to such transaction?

You only worked for this employer for two months? Did you file a return that included the income you earned from this employer?

 

[zddoodah]

I was getting paid under the table for two months (unbeknownst to me - I was told I was a 1099 contractor).

Working as an independent contractor ("1099 contractor") is not the same thing as "getting paid under the table." "Getting paid under the table" usually refers to a situation in which the employer and employee illegally conspire not to report the employee's wages to federal and state taxing authorities in order not to pay the various payroll taxes. Being "a 1099 contractor" is a legal arrangement in which the employer pays the contractor, does not withhold taxes, but reports the payments via IRS form 1099, and the contractor pays the taxes. So...if, as you wrote (and as your statement that your "employer [eventually] decided to do the right thing" implies), you were "getting paid under the table," then you were conspiring to do something illegal. Is that really what you meant?

If you didn't intend the bit about working "under the table," did you concur with the assessment that you were "a 1099 contractor"? Or did you just accept it as true without giving it any thought?

Am I liable to pay him if I never agreed to such transaction?

You never agreed? You accepted the pay knowing that no taxes had been withheld. That being the case, and as my comments about should make clear, one of two things must be true: (1) You were perfectly happy to participate in an illegal scheme to be paid under the table; or (2) as a "1099 contractor," you knew (or should have known) that you would have to pay the taxes yourself when you file your next tax return. Either way, you don't have the obligation to pay back the portion of your wages that should have been withheld for taxes, but your employer likely may withhold extra for the taxes now.

 

[quincy]

... but your employer likely may withhold extra for the taxes now.

Morelessk8 only worked for the employer for two months and has not been employed by him for over a year.

 

[LdiJ]

California
I was getting paid under the table for two months (unbeknownst to me - I was told I was a 1099 contractor). My employer decided to do the right thing and retroactively report those payments to the IRS properly. I never withheld any portion of my pay for tax purposes. After not working for this employer for over a year, he’s asking me to reimburse him for the taxes withheld that he decided to pay (which should have been withheld from my check in the first place). Am I liable to pay him if I never agreed to such transaction?

I disagree with the other responses that you have received to one extent or another. It is unlikely that your former employer just up and decided to do the right thing and report the income correctly. Odds are that he got caught misclassifying employees in one manner or another and is being forced to clean it up. Whether or not you should comply with his request to reimburse him for the taxes depends on several factors.

Did he issue you a 1099-NEC originally? Did you file taxes using that 1099-NEC and pay the self employment tax? If so, you should absolutely decline to reimburse him for the taxes because you have already paid them and are not obligated to pay them twice. In that case you would inform him that you have already filed your return and paid the taxes.

If he issued you a 1099-NEC but you have not filed a tax return yet then it might be safe to reimburse him for the taxes if you are confident that he will cancel the 1099-NEC and issue you a W2 instead. Doing so would save you the employer's half of the SS and Medicare taxes. HOWEVER, you absolutely should not reimburse him for more than the exact amount that would have been withheld from your pay in the first place and unfortunately, it is not uncommon for employers in his shoes to try to get reimbursed by the employee for the employer's share too. The employee's share would be 7.65% of the gross pay.

If he is sketchy enough that you don't trust that he will follow through with things and is just trying to get money out of you then you might insist that he provide proof of some sort as to what is going on.

 

[quincy]

It might also be important to know exactly how much Moralessk8 made during his brief employment.

I don’t recommend Moralessk8 pay his former employer anything until he has a professional personal review.

 

[LdiJ]

It might also be important to know exactly how much Moralessk8 made during his brief employment.

I don’t recommend Moralessk8 pay his former employer anything until he has a professional personal review.

I don't disagree. However it is a tax professional he should consult first. I doubt that two months worth of pay would make it economically viable to consult a tax attorney.

 

[quincy]

I don't disagree. However it is a tax professional he should consult first. I doubt that two months worth of pay would make it economically viable to consult a tax attorney.

A tax professional would seem to be adequate.

 

[zddoodah]

I was getting paid under the table for two months (unbeknownst to me - I was told I was a 1099 contractor). My employer decided to do the right thing and retroactively report those payments to the IRS properly. I never withheld any portion of my pay for tax purposes. After not working for this employer for over a year, he’s asking me to reimburse him for the taxes withheld that he decided to pay

I just re-read your post and realized that I misunderstood it the first time. This leads me to ask the following:

Since you have "not work[ed] for this employer for over a year," that means we're talking about income you received in 2022 (or possibly earlier). Right? Did you receive a 1099 for this income? Did you receive a W-2? If the former, or if you received neither a 1099 nor a W-2, did you declare and pay taxes on the income when you filed your state and federal tax returns for 2022 (or the applicable year)? I suggest caution when deciding whether and how to respond to that last question.

 

[Bali Hai Again]

I just re-read your post and realized that I misunderstood it the first time. This leads me to ask the following:

Since you have "not work[ed] for this employer for over a year," that means we're talking about income you received in 2022 (or possibly earlier). Right? Did you receive a 1099 for this income? Did you receive a W-2? If the former, or if you received neither a 1099 nor a W-2, did you declare and pay taxes on the income when you filed your state and federal tax returns for 2022 (or the applicable year)? I suggest caution when deciding whether and how to respond to that last question.

Yep, especially since the IRS is hiring 3700 new employees allegedly just to keep track of millionaires and large corporations. If anybody believes that political crap from the current administration, I have a bridge that I’m selling spanning the Hudson River.

 

[quincy]

Yep, especially since the IRS is hiring 3700 new employees allegedly just to keep track of millionaires and large corporations. If anybody believes that political crap from the current administration, I have a bridge that I’m selling spanning the Hudson River.

Please try to leave politics out of posters’ threads. Although we all are guilty of this at times (I know I am probably one of the worst offenders), the FA administrators prefer we discuss politics in private messages.

 

[Bali Hai Again]

Please try to leave politics out of posters’ threads. Although we all are guilty of this at times (I know I am probably one of the worst offenders), the FA administrators prefer we discuss politics in private messages.

Will do. My apologies to you, the administrators and everyone else.

 

[quincy]

Will do. My apologies to you, the administrators and everyone else.

Thanks. And I will try my best to behave myself, as well.

 

[Moralessk8]

Thanks everyone for the replies. I mentioned in the original thread, but maybe I wasn’t clear: I was TOLD I would be a 1099 contractor. I filled out all the necessary paperwork, but the employer never actually filed that/paid me the way he should have paid a 1099 contractor for those two months. I say it was “under the table” only because taxes were not withheld and I was not even in the books as a 1099 contractor (although I was told I would be. Does that make sense?). I didn’t want nor approve being paid off the record in such a manner.

I worked for the employer for a total of 8 months, but was paid this way (“under the table,” for explanation’s sake) for two months. For the other 6 months, he decided to make me a W2 employee, but he is asking that I reimburse him for the two months worth of un-withheld taxes. Does that make sense?
Thanks again for your advice, everyone!