Under withholding

[ROVERTROUT6789]

Wisconsin - My employer has under withheld my commission checks all year. Currently I am short on what I should have paid in taxes by almost 3000$. Who is responsible for this and what should I do?

 

[FlyingRon]

You are responsible for taxes on your income whether you were properly withheld or not. Since this is a W-2 type situation most likely, you won't face any interest or penalty for the underwithholding.

 

[Taxing Matters]

Wisconsin - My employer has under withheld my commission checks all year. Currently I am short on what I should have paid in taxes by almost 3000$. Who is responsible for this and what should I do?

You are responsible for it. You got the extra money in your paycheck. Your employer didn't keep the money; it gave you the money instead of paying it to the tax agencies. You are responsible for ensuring your withholding will be enough to pay what you will owe. You should always verify that the withholding coming out will be enough. If it isn't, ask the employer to take out more or send in additional estimated payments yourself.

What you should do is pay the tax to the IRS and/or state. If this problem affects 2018 taxes and if you don't have an extension to file the returns you need to file them ASAP and pay the tax with the returns. The late filing penalty for the federal return is particularly expensive, and the penalty keeps adding up each month you fail to file until it hits a maximum of 25% of the tax owed on the due date of the return. Even if you have an extension, you might still get hit with a late payment penalty if that $3,000 tax you owe is more than 10% of the total tax on the return. In addition there may be a penalty for failure to make estimated payments (while called a penalty, this one is really just an interest charge). The extension to file is not, after all, an extension to pay the tax. But at least the late payment penalty is significantly less per month than the late filing penalty. And of course you'll pay interest on the tax owed no matter what. The state penalties and interest will be different, but again the longer you wait to file (if you don't have an extension) and to pay will cost you more.

As for your 2019 taxes, the thing you should do is increase your withholding for the rest of the year to catch up if you are short or make estimated payments to catch up.

Form 1040-ES is used for making estimated payments for the federal income tax and the form package has worksheets to help you figure out how much to pay. You might also find the IRS online withholding calculator helpful.

Since this is a W-2 type situation most likely, you won't face any interest or penalty for the underwithholding.

I don't know where you got that idea, but it is wrong. If your withholding is too low and didn't make timely estimated tax payments to make up for it then a penalty for failure to make estimated payments (basically an interest charge) will be imposed if the amount of the tax underpayment is large enough. And interest must by statute always be charged on tax that is paid after the due date for payment of the tax (which is not extended by an extension to file the return). There is no getting around the interest.

 

[LdiJ]

Wisconsin - My employer has under withheld my commission checks all year. Currently I am short on what I should have paid in taxes by almost 3000$. Who is responsible for this and what should I do?

You should provide a new W4 form to your employer to adjust your withholding for the rest of the year. However, either you or your employer could be technically responsible for the error, but even if your employer is responsible for the error, that doesn't mean that your employer should pay your tax. You got the benefit of the extra money in your paycheck, you will owe the tax.

 

[PayrollHRGuy]

@ROVERTROUT6789

Let me guess. You receive a separate check for your commissions and it is smaller than your normal paycheck.