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DS once found that nothing had been withheld from his pay for the year. I asked him why he never noticed and he said he'd gotten a raise at the beginning of the year and figured that was why he got a nice bump in his take-home. He talked to HR and they claimed that he'd said he was exempt from withholding. DS is NOT that sophisticated when it comes to taxes and would not have done that- and any competent HR department would have questioned it anyway. They had no written record of such request, of course.
So- I consulted my brother the hotshot tax accountant, who said DS should just write a letter to the IRS and explain the mistake and pay what was owed with any penalty. He was probably making $45K or so at the time and had a lot of legitimate deductions so the amount owed wasn't much. No repercussions from the IRS at all.
I'd agree that burdening your employer's HR team to slightly optimize your payroll cashflow (at risk of paying a penalty later on) is a bad idea, but I'd argue what you did in response is even worse. To the impacted employees and their coworkers it will appear that promotion decisions are arbitrary; that's completely toxic to work output generally and retention of stronger people and will hurt the company a lot more than the extra HR workload the people doing this nonsense are imposing. It's a disproportionate and harmful response.
It's fine to disagree, but the decision was hardly arbitrary. Let me give a bit of background.
Supervisor X started gaming the system a couple of years prior. From there suddenly the entire factory wanted to start doing it. In our benefits meeting, everyone was told this practice was done and no longer available and correct W-4s were needed. Now, while English was a 2nd language to about 95% of the group....everyone seemed to get the message, except this guy.
Technically speaking, withholding is changed via W-4 and you've committed Federal perjury if you are lying on said form. Companies then must follow certain withholding rules.
The important thing was that the factory stopped looking for it. None of them got in any trouble. As for the ringleader:
- This person is willing to waste company resources on personal matters
- This person is willing to compound matters by leading others down the wrong path.
- When concern is brought up, he chose to fight rather than comply.
- This person is tight for cash, and willing to break the law to get more.
Now, I didn't say we fired him or had any intention of doing so. We kept him. My voice in accounting and finance generally was inconsequential to whom production promoted, but there's a voice. How did someone do on cycle counts, kan ban card updates, BOM reconciliation, part place/pull accuracy etc. If the only thing I have to say about you is the guy wastes time filing fictitious W-4's, it doesn't mean he can't drive a forklift, but I may not want to get him a P-Card. If handling a P-Card is a requirement for a role, then that's a problem.
Ultimately it wasn't my problem though, it was productions. In the actual department, playing coy with Federal requirements will get you gone pretty quickly.
In reality, this guy's main problem is he started bragging to the others how to hack the government. In the OP's case, it sounds like the same thing is happening. Who knows, maybe the same guy.
On the side, constantly screwing with your HR's payroll is a great way to lose credibility incredibly quickly. I have recommended people be passed over for a promotion because they are focused on gaming the system (as I saw it) and not on the things that would make the company better and allow for higher pay.
There's a million ways to do your taxes. Don't involve your employer.
Unless the employee did something else wrong, I think you were out of line. Taxpayers have a responsibility to arrange their financial affairs so as to legally minimize their tax liability. A company that does not cooperate with that is shortchanging the employee.
You can claim whatever you want on withholding, you're only hurting yourself come tax time when you file with the IRS. Your tax preparer shouldn't let you lie. Self-submit and you're just lying to yourself and many others.
I understand certain things may cause you to legitimately claim more exemptions than you have children. For example:
Enter "1" if you are single and have only one job / married filing jointly and have only one job
Enter "1" if no one else can claim you as a dependent
But family of 5 meaning 3 kids, you're WAY overboard on exemptions. You'd better be putting some back for what you'll owe. Just saying.
Unless he's been able to come out ahead in previous years itemizing and claiming this nonsense, I don't see how this can possibly work.
Some people have big deductions. The way you account for those is to adjust the withholding allowances. The only "cheating" aspect is the troublesome quote, "he won't get caught that way." Caught doing what?
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.
It's fine to disagree, but the decision was hardly arbitrary. Let me give a bit of background.
Supervisor X started gaming the system a couple of years prior. From there suddenly the entire factory wanted to start doing it. In our benefits meeting, everyone was told this practice was done and no longer available and correct W-4s were needed. Now, while English was a 2nd language to about 95% of the group....everyone seemed to get the message, except this guy.
Technically speaking, withholding is changed via W-4 and you've committed Federal perjury if you are lying on said form. Companies then must follow certain withholding rules.
The important thing was that the factory stopped looking for it. None of them got in any trouble. As for the ringleader:
- This person is willing to waste company resources on personal matters
- This person is willing to compound matters by leading others down the wrong path.
- When concern is brought up, he chose to fight rather than comply.
- This person is tight for cash, and willing to break the law to get more.
Now, I didn't say we fired him or had any intention of doing so. We kept him. My voice in accounting and finance generally was inconsequential to whom production promoted, but there's a voice. How did someone do on cycle counts, kan ban card updates, BOM reconciliation, part place/pull accuracy etc. If the only thing I have to say about you is the guy wastes time filing fictitious W-4's, it doesn't mean he can't drive a forklift, but I may not want to get him a P-Card. If handling a P-Card is a requirement for a role, then that's a problem.
Ultimately it wasn't my problem though, it was productions. In the actual department, playing coy with Federal requirements will get you gone pretty quickly.
In reality, this guy's main problem is he started bragging to the others how to hack the government. In the OP's case, it sounds like the same thing is happening. Who knows, maybe the same guy.
Do it the same all over again here.
I'm not understanding how he was gaming the system or hacking the government.
I'm not understanding how he was gaming the system or hacking the government.
Taxpayers fill out W-4s. They can claim as many or as few exemptions as they are entitled to based upon the instructions there, and swear the number correct under penalty of perjury. Based upon the number of exemptions, this will give the payroll the exact amount they must withhold from your check and send on to the government.
What some people will try and do is take more exemptions than they are entitled to. (So, say I have 9 children for example) which will reduce the amount of money that is withheld. Now, payroll has not basis for doubting that you have 9 kids, so you do it once and leave it....there's no issue. That's the individual's problem. It's when an individual switches back and forth between 9 and 0 children that things start to get screwed up. That causes problems.
Payroll audits have 0 materiality in them. I was friends with one lady whose company faced a ridiculous auditor who was looking to assess an $80K fine on the basis of a delta that was less than $10.
If you want to claim 9 kids....fine do it...but stay at 9 kids, but don't switch back and forth from 9 to 4. If you do, for God's sake don't convince everyone else in your proximity to do the same.
Taxpayers fill out W-4s. They can claim as many or as few exemptions as they are entitled to based upon the instructions there, and swear the number correct under penalty of perjury. Based upon the number of exemptions, this will give the payroll the exact amount they must withhold from your check and send on to the government.
What some people will try and do is take more exemptions than they are entitled to. (So, say I have 9 children for example) which will reduce the amount of money that is withheld. Now, payroll has not basis for doubting that you have 9 kids, so you do it once and leave it....there's no issue. That's the individual's problem. It's when an individual switches back and forth between 9 and 0 children that things start to get screwed up. That causes problems.
Payroll audits have 0 materiality in them. I was friends with one lady whose company faced a ridiculous auditor who was looking to assess an $80K fine on the basis of a delta that was less than $10.
If you want to claim 9 kids....fine do it...but stay at 9 kids, but don't switch back and forth from 9 to 4. If you do, for God's sake don't convince everyone else in your proximity to do the same.
Leave your company out of your games.
The amount of money the person would pay in taxes the end would be the same in the end whether they pay it while filing taxes or throughout the year. I can understand you saying it may make a little more work for the company, however, you haven't explained how its gaming the system.
The only reason to follow the guidelines on dependents is to not get behind on your taxes. You are not breaking any laws by claiming more dependents during the year.
If you have 2 dependents and claim 9 dependents then you will pay less during the year. You will hold on to more of your money longer.
When you file your taxes you can only claim the actual number of dependents that you have. If you have 2 dependents and not 9 dependents then you file your taxes with 2 dependents, even though you claimed 9 all year long. Cheating on taxes would be in creating fake dependents. I am not sophisticated enough to figure out how to do that.
If you owe money you pay what you owe. The IRS does not care if you paid taxes all year long or if you waited until April 15th to pay them.
If you are even and owe nothing or get owed nothing, then so much better for you.
If the IRS or your state owes you money, then maybe file 10 dependents the next year.
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He talked to HR and they claimed that he'd said he was exempt from withholding. DS is NOT that sophisticated when it comes to taxes and would not have done that- and any competent HR department would have questioned it anyway. They had no written record of such request, of course.
