Janitor Bob Posted March 12, 2011 Report Share Posted March 12, 2011 Client just came in with his W-2. made $18,028.59 (box 1), but only had Fed tax withheld (box 2) of $43.16. Client states that this cannot be right. He is sure that this former employer MUST have held out more than that from his pay each week.....but states that this former employer had their payroll done by an outside payroll company (Paycor) and that employer never distributed pay stubs.....Payroll simply deposited directly into employee checking accounts...So I cannot look at them to verify tax withheld. Futhermore, the outside processing company will not deal with him directly or provide paystub copies....they tell him that they will only deal with his former employer...So this appears to be a dead end Where I work full-time, I use this same outside company for our payroll. They do generate paydtubs for the employees, but it is employer's responsibility to download, them, print them, and distribute to employees. When I look closer at the W-2 information, it appears that he was claiming 7 exemptions. I explain to client that apparently when he filled out his W-4, he claimed married with 7 exemptions....and that is why he had very little Fed tax withheld. Client claims that he never filled out a W-4. If this is true, would it be normal/legal for employer to enter married and 7 exemptions for the employee/client? Either way, the client is going to owe....wether he filled out the W-4 or not, he did not have enough withheld from his pay (since he only has one child, not 7).....Just wondering if an employer would actually do this. Quote Link to comment Share on other sites More sharing options...
Medlin Software, Dennis Posted March 12, 2011 Report Share Posted March 12, 2011 Employer has no obligation to make sure the employee's tax return works to no owed amount... Employer has to withhold based on a valid W-4 (employee has the obligation to submit a W4 that meets their needs) or at single 0 if there is no valid W4. Other than single 0, or a valid W4, an IRS lock in letter is the only alteration allowed. No valid W4, employer HAS to use single zero. Now 18k, if for a full year, is not much these days. With the 2010 credits, that FWH certainly may have been a proper calculation, possibly even for single and zero... (off the top of my head) Either way, if the employer reasonably withheld what they believed was correct, the employer has done their part. The employee has the final responsibility. Not checking and keeping their stubs is a good hint that the employee is not really in a position to make those types of decisions. Quote Link to comment Share on other sites More sharing options...
samingeorgia Posted March 12, 2011 Report Share Posted March 12, 2011 Just yesterday, I got a call from a former employee of a client,complaining about inadequate withholding. The caller wanted to claim that it was his employer's fault that he now has to pay. I asked him whether the employer gave him a paystub each week with his check; I knew that they did issue a paystub. He begrudgingly admitted that he had looked at them and that they showed zero withholding. I told him that he should have corrected it at that point and not to wait until March to try to "change something". The real problem is the attitude in this country that if I've got a problem, somebody else needs to pay for it. That's what's killing this place. Quote Link to comment Share on other sites More sharing options...
Bart Posted March 12, 2011 Report Share Posted March 12, 2011 Where I work full-time, I use this same outside company for our payroll. They do generate paydtubs for the employees, but it is employer's responsibility to download, them, print them, and distribute to employees. If paystubs were ever generated maybe you can still download them. Quote Link to comment Share on other sites More sharing options...
RitaB Posted March 12, 2011 Report Share Posted March 12, 2011 He begrudgingly admitted that he had looked at them and that they showed zero withholding. I told him that he should have corrected it at that point and not to wait until March to try to "change something". The real problem is the attitude in this country that if I've got a problem, somebody else needs to pay for it. That's what's killing this place. I could not agree more. Had a lady in here last week wondering "What happened?!" that she owed so much. Well, let's see. You're in the 25% tax bracket, and each of you had less than 10% withheld from your earnings. And guess what? She is the office manager for a doctor and also the payroll clerk. "What happened?!" indeed. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 12, 2011 Report Share Posted March 12, 2011 If he has his W-2 and his bank statements, then the difference between his gross wages/# of payrolls and a deposit is the state/SS/federal w/h. You know the SS % and at his salary level you can probably determine his state w/h. I run into clients that say they had a lot more withheld, when that w/h they're remembering was SS. Quote Link to comment Share on other sites More sharing options...
jainen Posted March 12, 2011 Report Share Posted March 12, 2011 >>clients that say they had a lot more withheld<< And the early-withdrawal clients who say, but I already paid taxes on it. Sorry, they only took 10% (and zero state), but you are in the 25% bracket PLUS the 10% penalty. Then I had a client yesterday who inherited $40,000. After I happily explained that it's tax-free to the heir, she pulled out a 1099-R with that sweet little X in the IRA box! She said that's okay because her broker told her she could just roll it into a tax-free annuity. I asked if she actually received a paper check that she gave to the broker, and started fishing for a gentle way to break the news that she owed $15000 state & federal, including being double-taxed because it pulled her Social Security into the mix. I love this job. Quote Link to comment Share on other sites More sharing options...
RitaB Posted March 12, 2011 Report Share Posted March 12, 2011 Yeah, the old "inheritance" thing. Got a guy a few years ago who cashed inherited savings bonds. $40,000 in interest. Preparer left it off the return. IRS had a little bee in their bonnet over that. It's kinda like the self-employed who think they don't have to file cause they're under $9,350 or whatever. Well, I hate to be the one to tell you... Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 12, 2011 Report Share Posted March 12, 2011 Yeah, the old "inheritance" thing. Got a guy a few years ago who cashed inherited savings bonds. $40,000 in interest. Preparer left it off the return. IRS had a little bee in their bonnet over that. It's kinda like the self-employed who think they don't have to file cause they're under $9,350 or whatever. Well, I hate to be the one to tell you... I had one of those last year -- guy inherited money from his uncle. Got the form with the "X" in the IRA checkbox and had to tell him not under this circumstance. He wasn't happy. Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 12, 2011 Report Share Posted March 12, 2011 I had an 82 year client a couple of days ago. She used to send estimated payments but last year the H&R block preparer told her not to send estimated payments because she didn't owe any taxes for 2009. She had a tax liability but she sent more than $3K on estimated so she got a refund. In 2010, following the preparer's advice, she didn't pay any estimated taxes and she owed more than 4K. The lady looked calm but I did't want to be the one to let her know that last year she got a big refund and this year she was going to pay more 4K. I was affraid she was going to have a heart attack, so I told my partner to give her the news. She was got the bad news and very nicely and she even made jokes about it. We both thanked her for taking the news very lightly and she said, I never trust H&R Block anyways and I have always sent estimated payment for the last 12 years. Anyways, I told my doctor that I was coming to prepare my taxes and he said to take my pills prior to getting here and to be relaxed. Thank you Doctor. Based on my conversation with this client, she doesn't need the doctors advice because he is very much in agreement with the US tax system. I do thank the doctor because it doesn't hurt to advise them anyways. I had another single young lady who was getting a refund for $52 and I was happy to inform her that she was getting a refund (new client). In 2009 she only worked 4 months and she got a refund for 2K. She was expecting a refund for 6K since she worked the whole year in 2010. I said: "I have prepared your taxes correctly and based on your facial expression, I will not be able to convince you that you are not getting a big refund this year. I could spend the rest of the day explaining to you how it works and at the end you will leave and go somewhere else. You have to trust me that I am doing a good job with your taxes. Here are your paper and you can go to H and R Block to get a second opinion". I gave her the documents back. I send people to H and R Block because they charge more than me and they charge for estimates. Quote Link to comment Share on other sites More sharing options...
jainen Posted March 12, 2011 Report Share Posted March 12, 2011 >>the H&R block preparer told her not to send estimated payments because she didn't owe any taxes for 2009<< I always like to take the dog's side in H&R Bash. They do a pretty good job. I admit I got caught a few times myself in this trap. The problem with the 82-year-old is that she didn't have to take Required Minimum Distributions in 2009, so her income was just her regular pension that already had withholding. If you were rushed and just let the software calculate safe harbor estimates, Block was right--she wouldn't have to mess with ES. But that's only to avoid a penalty. When RMD kicked in again (pulling Social Security along too), so did the rest of the tax. Even worse, the standard deduction is 500 or a thousand dollars less this year because you can't take property taxes. That's the way the Republican Congress extended the Bush tax cuts. Quote Link to comment Share on other sites More sharing options...
jainen Posted March 12, 2011 Report Share Posted March 12, 2011 >>she got a refund for 2K<< Don't you mean a refundable credit? Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted March 12, 2011 Report Share Posted March 12, 2011 My upset client can't believe that the brokerage firm didn't provide the basis for the mutual funds that they transferred in 2005. They were inherited and client did find the forms showing basis stepped up at that time but client is upset that firm didn't ask to input into their system and keep track of reinvested divs and cap gains. I explained how the law has finally been changed but only to the extent that the firm has the original basis. I asked client how did he think the brokerage could possibly know? He asked how I knew about this stuff. I explained that an accounting degree and MBA in taxation did a lot but investors should find out what they are getting into. I think he's calmer now, especially since I now know the sales are all long term, they are in the 15% bracket, and the gains are at 0% tax (except for one short term). When I originally input, the 1099 said all were short term because they dated from transfer into their firm. What people just don't know and get angry with us about is amazing! Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted March 12, 2011 Report Share Posted March 12, 2011 We all get a few of these each year. In my opinion, it only proves one thing. Taxpayers fail to fully understand their position with related taxable or non-taxable items. I try my best to make sure the client understands that regardless of what I or any other accountant, broker, tax preparer, etc; do or tell them, they are ultimately responsible for each and every line on the tax return. Too many times I have had to ask the question of why didn't you call and the usual response is because they were trusting someone else or didn't think they would have to pay. Folks don't appear to understand the necessity of good planning or any kind of planning at all. Over the years I have had to learn to not feel bad when a client owes because of their own irresponsiblity or ignorance. I too have gotten caught as Jainen mentioned but again, I usually follow up my recommendations with the following statement: "Call me at this time (usually 6 months into the year), make an appointment for a review so we can make any adjustments to avoid any unforseen tax liability." You guessed it, no calls or appointments but alot of crying before April 15th. Quote Link to comment Share on other sites More sharing options...
JohnH Posted March 12, 2011 Report Share Posted March 12, 2011 ---->. That's the way the Republican Congress extended the Bush tax cuts. <------ Slight correction to the verbiage here, if I may. Aren't you referring to the "Bush/Obama Tax Cuts" ? I think its important to give proper credit where it's due, especially in the rare situation in which a Democrat actually agrees to a tax cut. Quote Link to comment Share on other sites More sharing options...
grmy2h Posted March 13, 2011 Report Share Posted March 13, 2011 I send people to H and R Block because they charge more than me and they charge for estimates. A client went to HRB the other day for a second opinion... HRB told them I was right and charged them $300.00... Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted March 13, 2011 Report Share Posted March 13, 2011 It's a wonder that client told you the results. It can be embarrassing to admit such things. Is the client returning? Are you accepting? Did you say or think, "I told you so, nyah, nyah?" Quote Link to comment Share on other sites More sharing options...
grmy2h Posted March 14, 2011 Report Share Posted March 14, 2011 It's a wonder that client told you the results. It can be embarrassing to admit such things. Is the client returning? Are you accepting? Did you say or think, "I told you so, nyah, nyah?" Return was done and paid for, but not efiled yet because they wanted second opinion. Got the opinion, came back signed the forms and I efiled it. They didn't say alot just that they had to fork out $300.00. I didn't gloat, I believe things can come back to haunt you, so I just went on with it. Don't know what will happen next year. Quote Link to comment Share on other sites More sharing options...
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