Employer overpaid federal income taxes for me

[thebruh]

What is the name of your state? Tennessee

I discovered in February through my W-2 that my employer overpaid federal income taxes by roughly $15,000. I brought this up to them because it also caused some errors on my W-2 with incorrect wages.

They said it was too late for them to get their money back through the IRS so they wanted me to send them a check for $15,000 to match what they overpaid.

With my taxes filing jointly, this error on their end caused me to file my taxes differently than I would have in the past due to the extra scrutiny on my taxes having a W-2C (I asked them for a W-2C, but it still showed the federal income tax overpayment - they just corrected other issues).

They were expecting my taxes to have an additional $15,000 refund amount, but I never get a refund--I always owe.

Due to their error, I was unable to file like I normally do with certain deductions/itemizations. I tried explaining this, but they wanted a tax professional to craft a response. H&R Block and other tax services said they could not help me as I needed a tax attorney.

Do you all have any recommendations on what I can tell my employer? I'd appreciate a PM if you are a tax attorney that might be able to help out. I've talked to 2 tax attorneys locally and they are quoting me 8-10 hours of work at $250+ an hour--all of which my employer will not refund me for having to get a professional to answer this.

HELP!

 

[Taxing Matters]

Not enough information here to determine what the exact problem is and how to fix it. It sounds like you are saying the employer paid in $15,000 for federal income tax withholding than was actually deducted from your pay check. Is that right? Was the wage amount on the W2-C that you got correct? Was the withholding for FICA (Social Security and Medicare taxes) correct?

If the employer sent in $15,000 more than was deducted from your paychecks and you still owed tax when you filed, you were way, way off in your withholding. How is that you were that far off?

So far, I'm not seeing where this problem is an IRS issue. It sounds like it's a problem of your employer asserting you owe the employer for the extra that the employer sent into the IRS for you and you don't have the money to pay it. Is that indeed the main problem here?

 

[justalayman]

Does your withholding match what was actually withheld?

Your employer does not pay your taxes. They withheld your money and remits that to the irs on your behalf. If they deducted what is shown on your w2 from your pay, they were obligated to pay that to the Irs. You would not owe anything to your employer since it was always your money anyway. It was money you would have recieved on your paycheck that was paid to the irs instead.


If they didn’t withhold what is shown on your w2 then that needs to be corrected and you would have to amend (correct) your tax return. You may have to pay money to the irs but you would still not be liable to your employer.

At that point, if there was money your employer paid due to the error and your employer would be due refund or credit on what his business pays on behalf of his employees, then it’s between him and the irs.

Im not seeing how your employer could remit $15000 somehow towards your tax debt and it not be accounted for on your w2 and you owe the employer. You would not have gained benefit of such payment and as such, you would not owe anybody for the payment. The employer doesn’t get to say he paid more to the irs on your behalf and it not be shown on your w2 and he somehow claims you owe him that money.

 

[LdiJ]

I agree with JAL. I cannot see any manner where the employer could have remitted money to the IRS on your behalf, where you would actually owe money back to your employer. If the employer remitted money to the IRS but did not withhold it from your paycheck then you would owe money to the IRS and it would be your employer's problem to submit amended 940s to the IRS to get their money back.

 

[Dandy Don]

You may not necessarily need a tax attorney. Get an opinion or estimate from an enrolled agent or a CPA in your local area.

You have not yet contacted anyone at the IRS about this, correct?
They have not sent you any correspondence or notices about this, correct?

 

[LdiJ]

You may not necessarily need a tax attorney. Get an opinion or estimate from an enrolled agent or a CPA in your local area.

You have not yet contacted anyone at the IRS about this, correct?
They have not sent you any correspondence or notices about this, correct?

I don't think that this is an IRS matter from what the OP has said so far. It appears to be a matter between the employer and the employee, its just unclear what the matter really is.

 

[thebruh]

Going to try to answer some questions:

On one paycheck my employer paid the IRS $15,000 for my federal income tax section that I usually pay taxes on for my paycheck. That error was because they thought they were paying that for another person who had my same name. That person did relocation and the way my employer accounts for relocating is to put what they paid the moving company as earnings for that employee and my employer paid extra taxes to offset those earnings on that one paycheck.

My employer was expecting me to have an extra $15K on top of my return to pay them back since they paid it to the IRS. My W2C shows my correct earnings for the year, but my federal taxes withheld is $15K more than it should be.

I told them I agreed if it was just me filing then I would have had a big refund check and give it to them.

However, my wife is a subcontractor and we only pay her taxes once a year in April. I usually “play” with the numbers on her deductions so we don’t have to pay too much back to the IRS. However with this mix up I could not do that this past tax season as I felt extra scrutiny was to be had having a W2C.

I owed money to the IRS even with the $15K extra my employer paid on my behalf, but I’ve tried to nonchalantly explain to them that it didn’t matter about their $15K because I would have played with the deductions to make it where I only owed what I usually owe each year (like $5-$10K to the IRS). I’ve never gotten a refund since I’ve been married. My wife makes between $50-100K a year depending on how she does with clients.

I don’t do a very good job explaining this.

I called the IRS in February and tried to get my employer to work with the IRS and leave me out of it by adjusting my federal withholding to what it should have been and let them two worry about the $15K. My employer said they couldn’t do it. This is a Fortune 500 company.

 

[justalayman]

Did the employer pay you that $15,000 after realizing they improperly withheld the money from your pay?

 

[Taxing Matters]

Here is the problem then. Your employer paid in $15,000 more for your income tax than usual. It appears that this was reflected on your paycheck; if so, you knew about it when you got the paystub and should have addressed the problem then. In any event, the employer gave you the credit for the $15,000 on your W-2C and thus the IRS gave you credit for that against your income tax. You still owed because evidently you either (1) massively underestimated your withholding and estimated tax needs for the year or (2) you were counting that extra $15,000 that you should have known wasn't right. Either way, you didn't get that $15,000 back. That $15,000 is not your money. It's your employer's. It's all well and good to say that the employer ought to get the $15,000 back from the IRS, but if that happens, then the IRS will take away the $15,000 credit that you took on the return. The bottom line then is that either you owe the employer the $15,000 or you owe the IRS the $15,000. There is no way your employer gets the $15,000 back from the IRS and the IRS still gives you credit for it.

 

[LdiJ]

Here is the problem then. Your employer paid in $15,000 more for your income tax than usual. It appears that this was reflected on your paycheck; if so, you knew about it when you got the paystub and should have addressed the problem then. In any event, the employer gave you the credit for the $15,000 on your W-2C and thus the IRS gave you credit for that against your income tax. You still owed because evidently you either (1) massively underestimated your withholding and estimated tax needs for the year or (2) you were counting that extra $15,000 that you should have known wasn't right. Either way, you didn't get that $15,000 back. That $15,000 is not your money. It's your employer's. It's all well and good to say that the employer ought to get the $15,000 back from the IRS, but if that happens, then the IRS will take away the $15,000 credit that you took on the return. The bottom line then is that either you owe the employer the $15,000 or you owe the IRS the $15,000. There is no way your employer gets the $15,000 back from the IRS and the IRS still gives you credit for it.

That appears to be what the OP simply does not understand. He needs to negotiate some sort of payment plan with his employer to pay back the money he owes if he does not have it to pay back in a lump sum.

He also needs to stop committing tax fraud with his wife's self employment and they should be making estimated tax payments towards her tax obligations.

 

[not2cleverRed]

That appears to be what the OP simply does not understand. He needs to negotiate some sort of payment plan with his employer to pay back the money he owes if he does not have it to pay back in a lump sum.

He also needs to stop committing tax fraud with his wife's self employment and they should be making estimated tax payments towards her tax obligations.

Given his lack of understanding of what the $15,000 issue is about, I shudder to think what his "playing" with the numbers really is.

I think that he should stop "helping" his wife with her taxes.

 

[thebruh]

Okay thank you for the suggestions. I will do what you all suggest. After reading the comments I’ve clearly done this wrong.

One final question: should I work out the payment before taxes? As in I owe them $15,000, but if they take it after my taxes I’ll be paying more than $15,000.

Do you think I should push for them to take this money out before tax?

 

[LdiJ]

Okay thank you for the suggestions. I will do what you all suggest. After reading the comments I’ve clearly done this wrong.

One final question: should I work out the payment before taxes? As in I owe them $15,000, but if they take it after my taxes I’ll be paying more than $15,000.

Do you think I should push for them to take this money out before tax?

From what it sounds like, this was after tax money. Therefore it should be paid back as after tax money.

 

[thebruh]

From what it sounds like, this was after tax money. Therefore it should be paid back as after tax money.

To be picky - wouldn’t both of us be in different tax brackets? I always hear of companies being in like 15% or less. Not really sure though.

 

[LdiJ]

To be picky - wouldn’t both of us be in different tax brackets? I always hear of companies being in like 15% or less. Not really sure though.

The company's tax bracket is irrelevant here...but you are not necessarily accurate as to what a company's tax bracket is. Your own marginal tax bracket could potentially be less than 15%

In any case, again, it sounds like we are talking about after tax money therefore tax brackets are irrelevant.