Substitute W2

[JJStephens]

My client worked in a warehouse last year--didn't pay any attention to the fact no taxes were withheld. Normally I'd be a bit suspicious of that but he's a bit mentally challenged and very well might have not noticed. He was clearly an employee but when he asked for a W2 the owner said he doesn't issue W2s and to just file as an IC. His wages for the entire year were only $11063.

I'm doing a Form 4852 (substitute W2). Should I also do a 4137 to pay the employee's half of social security. I realize 4137 is for unreported tips but on another board I saw that advice given twice to a similar question. Somehow it just doesn't seem right, but I haven't been able to find an alternative approach and I'm just too blooming tired to keep looking. I'm hoping someone out there knows the answer off the top of their head.

BTW, thanks to all for the help given on this and the 'other' board this year and in years past. You're a great group!

[JohnH]

Assuming your client:

1)does not work there any longer & doesn't intend to ever work there again, or

2) if he still works there is prepared to get fired,

here's what I believe you should do:

1) Forget the 4852 - it isn't relevant

2) Prepare the 4137 & strike through the wording on line 1 - enter "Wages" on the dotted lines. The 4137 will calculate the employee portion of the SocSec/FICA tax and add it to his liability, but will omit the employer portion.

3) Prepare an SS-8 with employee name & SS# and all employer info. I prefer to have the client fill in the actual answers to the questions in his own words, but that's just me. (The main determinant is what the employee understood his employment situation to be, so I think it's important that he be able to explain it in his own words. I don't want to be accused of misrepresenting the situation if it's questioned).

4) Mark one copy of the SS-8 as "For Information Purposes Only" and attach to the return.

5) Mail the original of the SS-8 to the IRS office where it is required to be filed.

The above will save your client about $800 (the employer's portion of the SocSec/FICA tax) minus whatever you charge him for doing the extra paperwork. The IRS will probably not pursue it, but if they do the employer may get very upset with your client. (That's the reason for my opening comments). The other possibility is that the IRS will pursue it and disagree with your client, billing him the $800 plus interest a year or two down the road. I think this is the least likely outcome, but you should warn the client that it could happen and that you won't be responsible for the P&I if that should come to pass.

I've done a few of these and never heard another word about them, but one never knows what the future holds.

[Cathy]

The form to file with the return would be the 4137. Make a notation on the top of the 4137 that it is being filed to pay the social security taxes on wages incorrectly reported to the taxpayer on a 1099. The substitute W-2 form is not required, nor should be filed with the return. Also, a completed SS-8 needs to be sent for IRS to properly determine employee status. Also, taxpayer will be opening a can of worms, so to speak which if he is still employed with the same employer, needs to be taken into consideration. Cathy

[lbbwest]

I've seen other people post the same as JohnH, but in my experience the government NEVER pursues on a 4137 that's what the SS8 is for. So file the 4137 as advised, pay employee portion of SS & Medicare, and go home.