Employer no withholdings..what to do??

[shnurgle]

What is the name of your state? California
Hi,
From jan Through March of 2007 i was employed in NY and received wages and all taxes and medicare/SS were witheld correctly. In June i moved to California and began employemnt there. My employer has not witheld anything )neither Fed, nor medicare/SS)and we need to figure out what to do. i know that the witholding from my first job in Ny will cover portions of the 2nd job (because too much was witheld), but how does it work? Should i fill out a W4 now for my employer and have him retroactivly withold or should I jsut wait until the end of thee year and pay as a lump sum? i really dont know how any oft his works.

The reason we didn't withold in the first place is becasue originally we thought our arrangement wouldd be independent contractor, but after a close assesssment of the working relationship it is definitely employer/employee and now we're not sure how to go about the witholdings.

Any advice would be most appreciated!

 

[LdiJ]

What is the name of your state? California
Hi,
From jan Through March of 2007 i was employed in NY and received wages and all taxes and medicare/SS were witheld correctly. In June i moved to California and began employemnt there. My employer has not witheld anything )neither Fed, nor medicare/SS)and we need to figure out what to do. i know that the witholding from my first job in Ny will cover portions of the 2nd job (because too much was witheld), but how does it work? Should i fill out a W4 now for my employer and have him retroactivly withold or should I jsut wait until the end of thee year and pay as a lump sum? i really dont know how any oft his works.

The reason we didn't withold in the first place is becasue originally we thought our arrangement wouldd be independent contractor, but after a close assesssment of the working relationship it is definitely employer/employee and now we're not sure how to go about the witholdings.

Any advice would be most appreciated!

Its a tough situation because it has gone on for almost 8 months and there is very little time left in the year to correct the situation.

I suggest that you and your employer both get a sit down meeting with a local tax professional to assess the situation...assuming that you both are on the same page regarding everything.

The biggest problem isn't income tax withholding, its social security and medicare taxes, and potential penalties against your employer for not properly filing quarterly employer tax forms and paying appropriate employer taxes.

A local professional can best help you both come up with strategies to resolve the situation. However, in my opinion, if your employer isn't willing to work with you to resolve 2007, and isn't willing to treat you as a full blown employee as of January 1, 2008, then you need to get a new job.

 

[TinkerBelleLuvr]

And be prepared to receive a 1099-misc with the employer treating you as a contractor. They YOU get to pay both portions of social security & medicare, along with the appropriate withholding taxes.

 

[shnurgle]

I definitely overpaid SS and Medicare at my previous job in NY. Won't this overage apply to the 2nd job's liability?

 

[TinkerBelleLuvr]

How do you know that you overpaid social security & medicare? chances are NOT on those. You may have paid in more in FEDERAL WITHHOLDING.

 

[shnurgle]

I was witholding taxes (including medicare and SS) based on an annual salary that is larger than my total earnings for 2007 will be. This is because I quit the job three months into the year, and as a result the amounuts paid to SS and medicare are larger (for those months) than should have been taken out. I'm just wondering if that overage will apply to the ammount owed from the new job. Clearly I will owe something to Medicare and SS, but I am trying to ascertain whether it will be a full 7.65% (which would be the employee's half of the liability) or whether because of the overage I can plan on owing less than that.

Thanks for your help.

 

[TinkerBelleLuvr]

The chances are slim that your employer overwithheld SS & medicare. I have seen it in like .1% of the tax returns that I have done. As for the withholding, THAT could have been taken out at a higher rate.

The employee pays in 7.65% of their wages into social security & medicare with each paycheck. The cutoff wage to stop social security is over 90K - no wage limit on medicare. The employer matches that 7.65% also. These taxes are sent in by your employer on the schedule the employer is required to pay.

A self-employed person pays both halves. That means that 15.3% of your net imcome is then paid in to the government. That is in ADDITION to your regular taxes. These are calculated at tax time. You should be sending in quarterly taxes to cover these taxes.

So, if no one is taking taxes out as you go, you wlll most like OWE the government at tax time.

 

[shnurgle]

Right, and this is definitely an employee/employer situation. I've spoken with my employer about it and he is willing to do what's necessary to make that so, whether it means filing a W4 form now and witholding extra $ to play "catch-up" or whatever. He will pay late penalties if necessary. I'm just trying to figure out the next steps. How do we figure out what is owed in SS and Medicare (or is it always the flat standard of 7.65% for employees)Should he withold extra $ and pay it in now, or should I just pay it as a lump sum at tax time. I realize that as a self emplopyed individual i would be responsible for making quarterly SE tax payments, but this needs to be handled as an employee situation. i realize that my employer will need to speak with a tax professional about this, but as he's about as knowlegable regarding taxes as i am, he asked me to ask around as well.

Thanks again for your help.

 

[TinkerBelleLuvr]

This is one of those times that you have to find a tax professional to help. This is NOT a do it yourself project.

 

[shnurgle]

True enough, thanks for your time. Would you recommend H&R block as a trustworthy destination?

 

[abezon]

Trustworthy? Sure. Sharp? Depends on who you get. Just ask for an appointment with one of their enrolled agents who has lots of small business experience. That way you won't get matched to a 1st year preparer who's still learning.