I am married but separated, have been for several years now. My ex is learning disabled, and I'm not talking ADD. He was on disability for quite some time.Last year, due to a friend being in management there, he was able to finally get a job. And once he was properly trained (which, knowing about the disability, our friend made sure happened), he has done just fine and has kept the job.We are quite amicable, so when he had W4's to fill out he brought them to me. I advised him to claim 0 since we don't know when we will finally get around to divorcing, and I knew that otherwise they might not withold enough. I went over the forms, they got filled out, and everything was hunky dory.At least it was until he brought over his W-2's. As I fired up the tax program, I realized with horror that his employer had withheld NO taxes whatsoever. NONE! In disbelief, I asked if he had his most recent paystub. He did, and they weren't withholding any taxes!Well, long story short, he owes about $1900 to the feds. According to his manager, he was mistakenly put as exempt for being a student (?!?!?!?!)What I would like is some ideas. Given that I KNOW for a fact that his W-4 was properly filled out, do we have any recourse to the employer for penalties and interest? Should we try to get the IRS to forgive the tax for this year because of the situation? My ex saw all the withholding for FICA etc, and didn't realize anything was wrong, and I kick myself doubly--first because if I had seen the paystub last year I would have been able to help him, and second because if I had known before I filed, we could have filed jointly and the refund would have been more than adequate to pay what he owed.Any ideas? =(
ZolaX: What I would like is some ideas. Given that I KNOW for a fact that his W-4 was properly filled out, do we have any recourse to the employer for penalties and interest? Should we try to get the IRS to forgive the tax for this year because of the situation? My ex saw all the withholding for FICA etc, and didn't realize anything was wrong, and I kick myself doubly--first because if I had seen the paystub last year I would have been able to help him, and second because if I had known before I filed, we could have filed jointly and the refund would have been more than adequate to pay what he owed.ZolaX -- you are a wonderful person! What a caring posting.Unfortunately, neither corporate payroll departments nor the IRS are likely to be moved by the situation. Nor, I suppose, can we expect them to be, except for the occasional individual .... but the facts are that this was probably one of those regrettable mistakes, yet the tax is still owed...Now: your own suggested retroactive solution -- that you could have filed jointly because your refund would have covered the tax he owes -- can be applied prospectively if you consider this: what you are saying, stated very simply, is that you can pay his tax. After all, applying your refund toward his tax means you are paying it. So just do it.Now, if you want to file and amended joint return, you could do that, if it would make a significant dollar difference in the net amount paid/received. But assuming that would not be a significant difference, why go to that trouble?As someone with a brother who is perhaps somewhat in the same situation as your separated husband, let me once again commend you for your compassion.mathetes
ZolaX asks,Given that I KNOW for a fact that his W-4 was properly filled out, do we have any recourse to the employer for penalties and interest?If the employer really did make the mistake, he should front you an interest-free loan for what should have been withheld, to be paid back via payroll deduction over several months.If the employer balks, you might want to discuss the situation with the IRS right away (don't wait until after April 15). They won't forgive the $1900, but they may work out a payback plan in which no interest or penalties are assessed.Needless to say, what did your friend do with all the extra money he got as a result of not having any taxes withheld???
ZolaX,If you have been separated for quite awhile (years), and he didn't make any money last year (and didn't file), there would be no penalties, I think.I have been told by a tax guy that you should never pay the penalties and interest, wait for them to bill you.I think I would include an explanation, no penalties or interest, and hope for the best. And in the meantime, start saving for the penalty and interest just in case.Beth
To ZolaX,It's been my experience with my clients that if you owed no tax last year, there will be no penalty or interest unless you do not pay in full by April 15th,(April 16th this year - unless you're in Mass, then it's April 17th).I agree with the writer above who suggested you filed the joint tax return if the liability on the amended return is less than $1900. And while you're at it, if your husband had no taxable income back to 1997, why don't you file amended returns back to 1997 and get those refunds? (Unless his social security becomes taxable when combined with your income and exceeds the personal exemption?) 1997 becomes a closed year on April 15th, three years from the original filing deadline of April 15, 1998.Best wishes to you both.
Let me provide just a bit more detail. In 1999, he owed no taxes because he was fully disabled. Since I had just started my web business, I filed separately and posted a net loss of $195. This year, I had a net loss of $45. He just started working in April of last year. I filed as head of household (I have children) without even thinking about it, not realizing the impending problem.IF we had filed jointly, we would have been eligible for the EIC, and between it and deductions, we probably wouldn't owe anything at all. But I have concerns that if I suddenly file an amended return to change my head-of-household status, the IRS will come down on us like a ton of bricks, especially given that I filed that way last year as well.That's why I am looking for options. Certainly it wouldn't hurt to try to talk to the IRS, because while there is no question that he should pay the tax, it is my hope that they will forgive the interest because it is an unusual circumstance.We'll be calling the IRS on Monday, and the return will be filed on time even if no payment is sent. After we find out from them what we can do, I will help him make the IRS an offer to pay X dollars a month until the debt is satisfied. I had to do that some years ago, and they were perfectly reasonable. It's not like it is an astronomical amount or anything, even with his proper withholding he will be able to pay them off within a year.Beth: He didn't know he had "extra" money! He had never held a job before--this is his first! As I said in the original post, he saw the deductions for FICA etc, and assumed everything was fine. While I assist him as much as I can, it's a fine line between helpful and intrusive, so I certainly wasn't going to demand that he show me his paystubs! I feel that his money is his business, except insofar as he comes to me and asks.He lives quite modestly, truth be told, and the only major purchase he has made in the last two years is a laptop. He financed it about three months ago because he wanted to begin to establish credit, and paid extra so it is almost completely paid for already. He is a natural Fool, so I am quite confident in his ability to adjust to a new budget. After all, disability didn't pay near as much as this job, and he did just fine on that. Still, I feel that he has really been shafted, and would think his employer should bear some responsibility for that. Is that something we should mention to the IRS, that they messed up? Even if they conveniently "lose" the paperwork, he has a witness (me!) that it was filled out properly.I appreciate your help!
ZolaX,I don't remember saying anything about "extra" money (which doesn't mean I didn't), but let me restate what I was trying to get at.You said that you filed on your own last year, and he didn't file last year (I think that is what you said if I read correctly).I am thinking that the IRS has some clause in the interest and penalty part about "if you paid at least as much as you did last year in taxes" then you don't owe interest and penalties. And I think zero is the same as zero, so that may be okay.Anyway, that was what I was trying to get at.Does that make some sense?I know I am not always clear in emails.BethBeth
To ZolaX,There'll be no problem with you filing an amended return and filing jointly just because you filed HH on the original return. It's done all the time. You are right about IRS being decent about working with you to pay your debt to them. A few years back IRS decided to become a kinder, friendlier bill collector. After all IRS is just a business like any other. I think they realized that you can get better results by treating people with honey instead of vinegar. Your husband's employer did make a mistake, but it's not criminal. Ultimately the employee is responsible for checking his pay stubs to make sure taxes are withheld and questioning the payroll department if something doesn't appear right. But when you are the employee and don't realize you even have a question, it's just plain unfortunate. We are human, we do make mistakes. Not all mistakes are subject to punishment, however. Your husband's employer has been informed and the correction made for year 2001, has it not? That's all that can be done. Best email@example.com
Beth:Actually, mathetes was the person who wanted to know about what he did with the extra money, this is what I get for sitting at the computer past my bedtime ;-)Now that I am awake and have some coffee into my system:I believe that there will be no penalty because he didn't owe any taxes in 1999. But since he can't pay in full immediately, I believe the IRS will charge interest while he pays. Thanks for the feedback and suggestions, we will be speaking to the IRS tomorrow. If they also think I should file an amended return changing my filing status, that is probably what we will do. And who knows, he may be eligible for some esoteric deduction because he went off disability last year.I also really appreciate the reassurance that the IRS will work with him, I had already told him that I was pretty certain they would, but it's good to have it confirmed.I will post tomorrow and let you all know what the IRS says.
Actually, mathetes was the person who wanted to know about what he did with the extra money, this is what I get for sitting at the computer past my bedtime ;-)Well, no.... actually actually that was duggg. But no matter, assuming you did get your sleep finally. ;-)
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