Legal Question in Business Law in California
Taxes withdrawn in 2008, not paid until 2009
To Whom It May Concern -
I recently quit my job due to the company owning $10k in back commission and not paying my 2008 taxes even though they deducted from my paycheck.
I have not worked for the company in over three months now. They are paying my taxes now each month - even though these taxes are for the previous year. It is causing a lot of problems as it appears that I am still employed but more importantly I am afraid that could personally be in a lot of trouble with the IRS if they find out what the ex-employer is doing. Currently they owe me over $6k but want to use the money they owe me towards a vehicle loan that is in the company name even though I use it personally. I am fine with this section BUT they do not have plans to immediately pay the auto loan off - instead are continuing the payments until 2010. I do not see this as being fair as this is money that has been owed to me for awhile now - in my mind, it should be paid off immediately so that the title can be transfered to my name. My question is can I go to jail over the IRS/taxes issue - how do I rectify? Addtionally is there anything I can do about the money currently owed and the vehicle? Thank you in advance for you time and advice.
2 Answers from Attorneys
Re: Taxes withdrawn in 2008, not paid until 2009
You should discuss this in detail with an attorney as soon as possible (I provide free initial consultations, as many attorneys do, so feel free to contact me directly). My biggest concern is not you going to jail for the company's failure to pay the IRS the payroll taxes they deducted from your wages (unless you had a hand in that somehow). But rather, my biggest concern is that this company is in financial trouble and if you patiently wait you'll be paid ten cents on the dollar when the company goes into bankruptcy. Be one of the company's debtors who demands timely payment while the money is still there (or, at the very least, protect yourself better). I have several other concerns, including that you are entitled to interest and that you are undoubtedly damaged in other various ways from the company's wrongdoing and should consider pursuing compensation on those things too.
Re: Taxes withdrawn in 2008, not paid until 2009
It's not clear to me what the company is doing, or why. Do they use an outside payroll service, or prepare payroll and withholding internally? The latter arrangement is more likely to result in improper practices, especially when cash is tight.
If all you see is a paycheck, showing gross, deductions and net, how do you know what the employer is remitting to the IRS? Many employers when short of cash will delay remitting withheld tax money to the IRS and use it as working capital, but this practice is not going to get the employee in trouble.
Remember also that taxes are due and payable, both by the employer and the employee, on a "when paid" basis, not "when earned." This means that if you worked in December, 2008 but got your December, 2008 paycheck on January 2, 2009, that income would be reported by you on your 2009 tax return due 4/15/2010.
Also keep in mind that commissions are often treated as earned and payable not when the sale is made, but when the customer pays for the product.
I'd discuss this with the employer and the state labor commissioner's local office, a tax advisor, and perhaps an IRS taxpayer-inquiries person. Maybe they can sort out the issues here. I'd shun the auto deal, but don't worry about jail or the IRS as long as it is the employer, not you, that's misbehaving.
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