With tax season fast approaching, it’s time to think about your own tax bill. If you’re like most Americans, you receive a W2 form from your employer. This form explains your individual taxes and what your employer has already paid on your behalf. You probably trust the information from your W2 without thinking twice.
However, that’s not always a good idea. Some unscrupulous employers try to cut their tax burdens by lying to the IRS and submitting false tax documents. If that’s the case, you could be losing money on your paychecks or end up paying more taxes than you need to. Here’s what you need to know about the laws your employer has to follow regarding your taxes and how to spot and fight back against tax fraud.
Federal Employer Tax Requirements Your Boss Must Follow
The IRS has strict rules regarding how companies need to handle employee taxes. Many companies look for creative ways to avoid following these rules to keep their tax bills low. Some of the most important and most frequently ignored regulations include:
Required Withholdings
When you accept a job covered by a W2, you will be given a document to determine your withholdings. This is money that your company is required to “withhold” from your paycheck to cover your tax burden.
If you follow the instructions on the sheet, you can have your job withhold the exact amount to cover your taxes for the year and avoid having to pay anything on April 15th. Your employer will submit them for you, so all you need to do is confirm that information with the IRS.
Form Due Dates
Your employer needs to send you certain documents to help you file your taxes. Under standard employment agreements, you’ll receive at least a W2 form. You may also receive documents like a 1095-B or 1095-C if you meet specific health insurance requirements. Finally, you may receive 401(k) or other benefit disclosures. Any forms you need to file your taxes must be sent from your job by January 31st.
Reporting Requirements
Finally, your company is also responsible for reporting your withholdings, benefits, and other information to the IRS on its own taxes. You don’t need to monitor this, but you should know it’s supposed to be happening.
How to Spot Employer Tax Violations
Your employer can violate any of the above requirements to cheat you on your taxes. If they’re trying to cut their own bill, the burden can fall on you.
That’s why you need to be wary and carefully read your paychecks and tax documents. You can prevent yourself from falling victim to your employer’s tax fraud if you watch for problems like the following.
Reducing Hours Paid
Depending on how you receive your paychecks, your company may misrepresent the number of hours you worked on your W2. If you ever receive payment in cash, your employer may not list time paid in cash on your W2. Whether or not you report the extra funds, you risk being audited because of the discrepancies between your reported income and your return.
Over- or Under Contributing to 401ks
Retirement funds like 401(k)s are typical targets of fraud. Your company may report that it contributed more or less to your 401(k) than it actually did, depending on the kind of fraud it wants to commit. This can affect your tax bill as well as your retirement plans.
Monitor your 401(k)’s actual balance to make sure the balance matches your employer’s claims, especially around tax time. That way, you can cut off fraud before it becomes a dramatic problem.
Shifting the Tax Burden to You
If you choose to have your job withhold funds from your paychecks to cover taxes, make sure you check their work. Companies may withhold more money than you request and only submit the bare minimum to the government.
As a result, you’ll find you need to pay even more in April. Meanwhile, the funds your employer has stolen from you cover their portion of the tax bill, too. You wind up paying both halves of the employment taxes.
You can avoid this by watching your withholdings on each paycheck and ensuring they line up with your requests. If they start creeping up and your monthly salary hasn’t changed, you may be a victim of employment tax fraud.
Unemployment Fraud
If you’ve lost a job recently, your former employer may be liable for extra taxes to your local government’s unemployment fund. Make sure the company lists you as being fired, not having quit. That ensures that you can receive unemployment funds and that your former company has to pay their required contributions to the state fund.
What to Do If Your Employer Is Cheating on Taxes
The IRS welcomes reports about tax cheats. If your job is violating its tax requirements at your expense, you can follow these steps to report them to the IRS and correct your personal bill:
- employment law attorney will help you organize your report. They can also help you sue your employer for damages if you’ve already been forced to pay excess taxes because of their fraud.
- proper whistleblower claim, and you may receive a portion of the back taxes your employer owes as an award for your help.
Don’t Let a Lying Employer Defraud You
Whether your job is forcing you to pay more taxes than you should or lying about your income to avoid unemployment taxes, you’re the one suffering. You can fight back and make sure that they’re paying their fair share.
You can get started by contacting an experienced employment lawyer. The right attorney will help you understand your situation and guide you through the legal processes involved in contacting the IRS. They can also help you take the case to court if your company objects. By working with the experts at the Law Offices of Todd M. Friedman, P.C., you can ensure you’re paying your taxes correctly and prevent your employer from taking advantage of you this April.
