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Old 12-23-2019, 02:07 PM
 
Location: OH>IL>CO>CT
5,484 posts, read 8,897,887 times
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Re penalties for willful misinformation on W-4,
there is also this from IRS Pub 505 at
https://www.irs.gov/publications/p50...link1000194462

"There also is a criminal penalty for willfully supplying false or fraudulent information on your Form W-4 or for willfully failing to supply information that would increase the amount withheld. The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both."

Given the number of wage-earners who do "play games" with their W-4, it would seem that the IRS does not worry about it unless something else draws their attention.
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Old 12-23-2019, 02:08 PM
 
1,292 posts, read 606,959 times
Reputation: 1431
Quote:
Originally Posted by artillery77 View Post
The Department of Labor and your State audit companies all of the time for payroll compliance. They know if penalties were $500, nobody would care, so they make their penalties quite large, and they backdate to the time of the filing and assess payday loan penalty interest rates. Considering these audits can occur years after the fact, the balance becomes quite substantial as an entire payroll will fail, and of course they will check the following payrolls.

In plain English---

If a business doesn't make payroll tax payments on time, the IRS can impose a penalty for these unpaid taxes. Penalty can be imposed by the IRS for:

Willful failure to collect tax,
Willful failure to account for and pay tax, or
Willful attempt in any manner to evade or defeat the tax or the payment thereof.

Note the use of the term "willful," which is defined by the IRS as "intentional, deliberate, voluntary, and knowing, as distinguished from accidental. "Willfulness" is the attitude of a responsible person who with free will or choice either intentionally disregards the law or is plainly indifferent to its requirements." In some cases, a reckless disregard of obvious facts is enough show willfulness.
---
New hire claims 7 dependents but doesn't have any. Accidental. (Employee Problem)
Existing hire claims 7, then 5, then 8, then 4. Willful. (Company Problem)

Some people can't or won't understand or accept that there are regulations surrounding payroll that must be followed. Further they can't distinguish when their own affairs negatively impact the company. That's a valid concern for an open management position.
Years ago, there was a requirement to forward W-4's claiming more than 10 dependents to the IRS. The IRS would review and sometimes send a letter to the employee asking for additional information on why the # was being claimed. Once in a while, the IRS would disallow the W-4 and notify the company of the correct # of dependents to use for withholding purposes.

No longer though. The employer's responsibility is to maintain the W-4s on file in the event of an audit to verify compliance with withholding requirements.

I can understand your using an employee's constant changing of their W-4 as a gauge of that person's judgment or how they manage their life to see if that's the kind of person you want in a higher position in your company, but they were not putting the company at risk legally.
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Old 12-23-2019, 02:16 PM
 
Location: Western Washington
9,784 posts, read 8,972,104 times
Reputation: 17088
Quote:
Originally Posted by SOON2BNSURPRISE View Post
Depending on your situation, you may end up holding on to your money during the year. Much better than having the Government hold on to you money all year. You may owe money, but if it was kept in an account no problem.
This is pretty pointless overall. The amount of money you are going to be able to keep in your account based upon tweaking the withholding tables is not going to be much. Maybe $5k over the course of a year for the average family. That gives you an average balance of $2,500 over the year, because in January you only have thewithholding from one or two checks.

At 0.5% interest, which is what you get for most money market accounts, that is $12 for a year. Is it worth changing your withholding twice for $12? Then having the discipline not to spend it?

I guess you could day trade with that money, but if you lose on the trades and the brokerage fees, you have a problem at the end of the year when taxes are due.
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Old 12-23-2019, 02:22 PM
 
12,333 posts, read 20,937,183 times
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Quote:
Originally Posted by artillery77 View Post
If it were simply gaming the government, I wouldn't care. That's on you. However, the company has laws it has to follow. Dude X says he has 15 kids. By law we are not allowed to ask about kids, so we don't. We received our W-4 and withheld as required by law. If later things turn out wrong, the company isn't liable regardless of whether or not it was the correct thing to do.

Form W-4's do change. People adopt, have kids, lose/gain custody, kids become independent, kids die. But, when W-4's starting jumping up and down, intra year and consistently, then the company picks up liability again because it's allowing a gaming of the system. Those employees have taken a non-issue, for the company, and made it a business risk to the company and spent company resources in the process.

You do not want your management ranks doing stuff like that. You need them finding ways that yes, we are subject to statutory, tax, environmental, quality and customer specification compliance. It surrounds us. How are you going to slash the red tape successfully, not make matters worse and at some point it catches up and then we're all facing a big mess.

Some people just don't get that. Someone constantly switching back and forth on their W-4 would be a good early indicator of that. Someone going further and spreading misinformation around the factory is definitely not who you want to put in charge of things.

Right or wrong, people like me exist. Do as you will.
Here’s the thing. I will go with you on gaming the system. However, unless he’s actually physically cheating on his taxes, at some point he has to pay the piper.

When he fills out his tax forms he has to provide his W-2, I think that’s what it’s called. I’m sorry I ran my own business for 21 years. He then uses that number to figure out how much he owes in taxes.

Now if he or is wife is running a side business, they may have a great deal of deductions going on that you don’t know about. They file a schedule C and possibly with all the deductions they can take, and the money they put away for their retirement that you don’t know about, instead of getting a huge massive check back from the feds, he balances it out so he only has to pay the state a small amount, and he gets back the same amount of money from the feds. That’s how we ran our business, on a break even.

You are dealing with one small aspect of one person’s total financial life without seeing the whole picture. You may not like what he’s doing but I have the feeling you don’t know everything.
__________________
Solly says — Be nice!
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Old 12-23-2019, 04:42 PM
 
Location: Silicon Valley
4,075 posts, read 1,858,657 times
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Quote:
Originally Posted by Tallysmom View Post
Here’s the thing. I will go with you on gaming the system. However, unless he’s actually physically cheating on his taxes, at some point he has to pay the piper.
I agree, but the requirement for an employer was not whether or not someone pays their taxes correctly. The requirement was for withholding performed in accordance with the law, part of which was to maintain valid for W-4s which would direct the amount of withholding. Auditors could (and did) invalidate W-4s in extreme cases.

Now, there is good news. For employers. For 2020. To address THIS very issue, the IRS has new rules and a new form for 2020. If you would like to see it, you can.

https://www.irs.gov/pub/irs-pdf/fw4.pdf

On it, you will see a line for people that wish to reduce their withholding amount. That's new. The calculation is the responsibility of the employee, not the employer. The employer's responsibility is ONLY for the input of the ending form being used properly and making sure it is signed and attested to.

(Now, while that seemingly was always the case, the reality is that the IRS had the power to invalidate forms previously if it was deemed we should have known they were not accurate. Time will tell on this new approach.)

So now you are all free to put down exactly what you want to be withheld. No more fake kids, just say what you want on the WITHHOLDING end of things. So long as that liability stays with the individual, feel free to do so. I'll only say the IRS wouldn't open Pandora's box without a plan.

In general, if you've ever had to square off on large governance compliance audit legal fight with a less than a perfect hand, and wondered if that was possibly the worst use of your time on this planet, you're going to understand that you really couldn't care less about some a-hat and their random ideas on taxes.

Whatever it is...don't involve your company in fighting city hall. It's like a ratty mouse staving off a bear by waving a ribeye at it.
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Old 12-24-2019, 09:06 AM
 
4,826 posts, read 2,084,949 times
Reputation: 9662
Quote:
Originally Posted by fishbrains View Post
This is pretty pointless overall. The amount of money you are going to be able to keep in your account based upon tweaking the withholding tables is not going to be much. Maybe $5k over the course of a year for the average family. That gives you an average balance of $2,500 over the year, because in January you only have thewithholding from one or two checks.

At 0.5% interest, which is what you get for most money market accounts, that is $12 for a year. Is it worth changing your withholding twice for $12? Then having the discipline not to spend it?

I guess you could day trade with that money, but if you lose on the trades and the brokerage fees, you have a problem at the end of the year when taxes are due.
The people I know who do it aim to have no refund when they file taxes and nothing owed. They don’t believe in providing an interest-free loan to the federal government and pick the withholding that best allows them to do that. The interest might not be much, but if you can invest the money yourself in January instead of getting a refund more than a year later, it can add up.
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Old 12-24-2019, 09:58 AM
 
27,281 posts, read 34,187,321 times
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Quote:
Originally Posted by grouse789 View Post
it works because he switches the dependents back to five in December. to me that's red flags everywhere. That's why I presented the scenario here.
You can set your exemptions to whatever you want, on your WITHHOLDING. I know folks that do this frequently when they need a little extra cash that paycheck. Not sure why that would be a red flag for anything.

Last edited by ChessieMom; 12-24-2019 at 10:10 AM..
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Old 12-24-2019, 10:07 AM
 
27,281 posts, read 34,187,321 times
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Quote:
Originally Posted by artillery77 View Post
The OP as well as my situation, are instances where someone is repeatedly changing their statements in an obvious fashion. It's the back and forth that causes the pain. How robust of a system is needed to store company W-4's in order to defend payroll withholding decisions made for each period of time? Because, and this is important, at some point the auditor can simply declare that we're collecting W-4s that we know are incorrect and assess us fines on the entire payroll stating everyone should be withheld at 0 exemptions. How fair is it for a worker that has done nothing wrong that suddenly must pay greater withholding because HR let the company run wild?
Most large companies today have payroll systems that allow employees to change their withholdings online. The P/R folks are not involved at all and actually rarely are even aware of those changes.
I can change mine every paycheck if I wish. No big deal.
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Old 12-24-2019, 10:09 AM
 
27,281 posts, read 34,187,321 times
Reputation: 35024
Quote:
Originally Posted by reed303 View Post
Be aware that the IRS is in the process of issuing a re-designed Form W-4 for 2020. It will no longer use "exemptions", but will directly calculate a dollar amount to be withheld.

A draft of the new form, and more details, can be seen here:
https://www.irs.gov/pub/irs-dft/fw4--dft.pdf

EDIT: actually the new form and instructions has been released at:
https://www.irs.gov/pub/irs-pdf/fw4.pdf
Yup. A major pain for the IT folks too - software patches and upgrades to implement these major changes.
AND for the Payroll Dept. that will get a MILLION phone calls from the staff that cannot figure it out.
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Old 12-24-2019, 10:16 AM
 
238 posts, read 91,568 times
Reputation: 296
Quote:
Originally Posted by Tallysmom View Post
I knew more people going the opposite direction. They took fewer deductions in order to have a big tax refund. For whatever reasons.
I think some may do this as some sort of savings plan.
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