Payroll shenanigans and their implications

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diomaiuti
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Payroll shenanigans and their implications

Post by diomaiuti » Tue Oct 03, 2017 12:15 pm

Hello all,

For the last 18 months or so, I have worked for a small business which was acquired by new owners just before my hiring. It offers no benefits of any kind (previous owners' 401(k) and health ins. were done away with), but I have been relatively happy to continue for the time being because my current focus is on debt reduction, not retirement savings, and the pay rate is reasonably good with extra hours often available.

However, I'm concerned about the longer term stability of the business. Various actions taken by the owner seem to suggest that there are cash-flow or other problems. He shares nothing with us, though, so I'm can't be certain of this.

Recently (last 2 pay periods), I have found my paycheck failing to reflect all the hours I worked. Instead, after a few days, I find an envelope of $20 bills with my name on it at my desk. It contains the remainder of my pay. The sum reflects deduction of "taxes" at about a 28% rate, roughly
the same as I would have received had it been processed through payroll.

What does this change suggest to everyone? How does the owner benefit from doing things this way? Can I assume he's not paying his half of the various taxes? What is my responsibility in this case? And, bottom line, what would you do in this situation?

Thanks,
Diomaiuti

Jags4186
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Re: Payroll shenanigans and their implications

Post by Jags4186 » Tue Oct 03, 2017 12:18 pm

Run, don’t walk, to a new job.

psteinx
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Re: Payroll shenanigans and their implications

Post by psteinx » Tue Oct 03, 2017 12:20 pm

This situation sounds very sketchy.

Not only is he quite possibly not paying his half of social security, he may not be withholding any taxes. When you go to pay your taxes in April, any "phantom withholding" from this employer will not [EDIT - MAY not - see below] credit* towards whatever you owe the IRS (or your state, city, etc.)

Just generally, this sounds like a business circling the drain, and a situation that could create headaches (including tax bills, potentially) for you.

EDIT(s)
* OK - I shouldn't have been so firm on this point. I'm neither an accountant nor a lawyer, so I don't know how the responsibility, vis-a-vis taxes owed to the IRS and other tax entities, would fall in the situation that is or may be happening to OP. There is discussion by other posters below - I don't know how authoritative any of it is - OP should proceed with caution, and with own research and perhaps professional advice.
Last edited by psteinx on Tue Oct 03, 2017 4:25 pm, edited 4 times in total.

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8foot7
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Re: Payroll shenanigans and their implications

Post by 8foot7 » Tue Oct 03, 2017 12:22 pm

This is not good news for you and implies he's not paying his taxes or perhaps even yours. Keep your stubs and document with photos each time this happens.

ResearchMed
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Re: Payroll shenanigans and their implications

Post by ResearchMed » Tue Oct 03, 2017 12:27 pm

"Interesting" if unpleasant situation.
(And yes, sounds like a VERY bad prognosis in terms of future employment "stability".)

But a question:

IF a employer with W2 employees (not referring here to 1099 contractors) fails to withhold taxes and/or SS, who is ultimately responsible for those?
Suppose the employer has gone totally belly up by the time this is noticed, with no assets to speak of remaining to seize?

Is the employee responsible for any/all of that non-withheld "withholding"?

RM
This signature is a placebo. You are in the control group.

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8foot7
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Re: Payroll shenanigans and their implications

Post by 8foot7 » Tue Oct 03, 2017 12:30 pm

ResearchMed wrote:
Tue Oct 03, 2017 12:27 pm
"Interesting" if unpleasant situation.
(And yes, sounds like a VERY bad prognosis in terms of future employment "stability".)

But a question:

IF a employer with W2 employees (not referring here to 1099 contractors) fails to withhold taxes and/or SS, who is ultimately responsible for those?
Suppose the employer has gone totally belly up by the time this is noticed, with no assets to speak of remaining to seize?

Is the employee responsible for any/all of that non-withheld "withholding"?

RM
The withholder is responsible. The employee won't owe

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Watty
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Re: Payroll shenanigans and their implications

Post by Watty » Tue Oct 03, 2017 12:37 pm

Jags4186 wrote:
Tue Oct 03, 2017 12:18 pm
Run, don’t walk, to a new job.
+1

One problem is that he is not paying the Social Security taxes on that so if something happens you will get paid less if you are disabled or when you retire.

In effect he is stealing 15% from you for the employers share of these and your share which is is withholding. The same is true for the federal and state withholding.

You also should be declaring the cash payments on your taxes and that can com back a bite you when there is an audit since you will look like an accomplice. A couple of problems are;
1) Federal taxes you might need to pay on the cash or risk tax fraud.
2) Same with state taxes
3) How you fill out things like loan applications and applications for college financial aid for your kids will also be risking fraud.
4) If you get an ACA subsidy or any similar tax credits and don't declare this income that would also be fraud.

I would get another job then report the situation to your state labor board.

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dm200
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Re: Payroll shenanigans and their implications

Post by dm200 » Tue Oct 03, 2017 12:41 pm

diomaiuti wrote:
Tue Oct 03, 2017 12:15 pm
Hello all,
For the last 18 months or so, I have worked for a small business which was acquired by new owners just before my hiring. It offers no benefits of any kind (previous owners' 401(k) and health ins. were done away with), but I have been relatively happy to continue for the time being because my current focus is on debt reduction, not retirement savings, and the pay rate is reasonably good with extra hours often available.
However, I'm concerned about the longer term stability of the business. Various actions taken by the owner seem to suggest that there are cash-flow or other problems. He shares nothing with us, though, so I'm can't be certain of this.
Recently (last 2 pay periods), I have found my paycheck failing to reflect all the hours I worked. Instead, after a few days, I find an envelope of $20 bills with my name on it at my desk. It contains the remainder of my pay. The sum reflects deduction of "taxes" at about a 28% rate, roughly
the same as I would have received had it been processed through payroll.
What does this change suggest to everyone? How does the owner benefit from doing things this way? Can I assume he's not paying his half of the various taxes? What is my responsibility in this case? And, bottom line, what would you do in this situation?
Thanks,
Diomaiuti
Severe difficulties in keeping the business afloat. With the cash, highly suspicious that taxes and reporting not being done. May include not remitting withholding to the IRS.

1. Keep detailed track of withholdings in case funds not sent
2. Look for a new job ASAP
3. Cash payroll checks immediately
4. Do NOT lend or advance, etc. funds to the eployer

feehater
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Re: Payroll shenanigans and their implications

Post by feehater » Tue Oct 03, 2017 12:51 pm

The employer also might not be paying his unemployment insurance or workers comp premiums to the state which might make it more difficult for the OP to collect if he gets laid off or injured or the business goes bankrupt?

ResearchMed
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Re: Payroll shenanigans and their implications

Post by ResearchMed » Tue Oct 03, 2017 1:02 pm

8foot7 wrote:
Tue Oct 03, 2017 12:30 pm
ResearchMed wrote:
Tue Oct 03, 2017 12:27 pm
"Interesting" if unpleasant situation.
(And yes, sounds like a VERY bad prognosis in terms of future employment "stability".)

But a question:

IF a employer with W2 employees (not referring here to 1099 contractors) fails to withhold taxes and/or SS, who is ultimately responsible for those?
Suppose the employer has gone totally belly up by the time this is noticed, with no assets to speak of remaining to seize?

Is the employee responsible for any/all of that non-withheld "withholding"?

RM
The withholder is responsible. The employee won't owe
What if the employer does indeed go belly up, with no recoverable assets to seize?
Is the employee out of luck in terms of Social Security, for example, which depends upon payroll withholding totals?

RM
This signature is a placebo. You are in the control group.

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dm200
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Re: Payroll shenanigans and their implications

Post by dm200 » Tue Oct 03, 2017 1:05 pm

If/when you leave, I also suspect getting the full check through your departure date may be a "challenge". if possible time your notice and departure as close as possible after you get (and cash) your payroll check. There will be little incentive to pay someone who has departed the company.

If you have reimbursed expenses (travel, for example), try to minimize your expenses for those things since there will be difficulty getting reimbursed.

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celia
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Re: Payroll shenanigans and their implications

Post by celia » Tue Oct 03, 2017 1:12 pm

Is this happening to other employees or just you? Is there a possible reason the books could be "off", such as a change in bookkeeping software or a personal emergency for the owner? Has anyone been laid off or hired recently?

I would keep all payroll stubs/receipts for the year and scrutinize the W-2 you get at the end of the year. In fact, calculate your own numbers for each box before you receive the official one from the employer. If the employer's W-2 is incorrect, I would talk to them and give them a chance to correct it. If they won't, I would file taxes as if it was correct and make a note on the tax return that the W-2 is incorrect and let the IRS deal with them (as they will).

https://www.irs.gov/pub/irs-pdf/fw2.pdf

If this continues, you should find a new job, for at least the reason that they will not be in business very long.

SlowMovingInvestor
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Re: Payroll shenanigans and their implications

Post by SlowMovingInvestor » Tue Oct 03, 2017 1:13 pm

ResearchMed wrote:
Tue Oct 03, 2017 1:02 pm
8foot7 wrote:
Tue Oct 03, 2017 12:30 pm
ResearchMed wrote:
Tue Oct 03, 2017 12:27 pm
"Interesting" if unpleasant situation.
(And yes, sounds like a VERY bad prognosis in terms of future employment "stability".)

But a question:

IF a employer with W2 employees (not referring here to 1099 contractors) fails to withhold taxes and/or SS, who is ultimately responsible for those?
Suppose the employer has gone totally belly up by the time this is noticed, with no assets to speak of remaining to seize?

Is the employee responsible for any/all of that non-withheld "withholding"?

RM
The withholder is responsible. The employee won't owe
What if the employer does indeed go belly up, with no recoverable assets to seize?
Is the employee out of luck in terms of Social Security, for example, which depends upon payroll withholding totals?

RM
There is a fairly strict law called the TFRP which makes any 'responsible person' -- (not just the owner, but a senior management level employee) personally liable for such shortfalls. This cannot be discharged in bankruptcy.

Also, note this link

https://www.irs.gov/compliance/criminal ... nforcement

Employees who are concerned that their employer is improperly withholding or failing to withhold federal income and employment taxes should report their employer by contacting the IRS at 1-800-829-1040. In cases where the employer withheld employment taxes but failed to deposit them, or failed to issue W-2s, the employee should contact the employer to request the W-2. If the employee is unable to secure a W-2 from the employer, the employee should complete and attach Form 4852, Substitute for W-2, to their tax return using the best information available to calculate the wages and the withholding. This information can often be secured from pay stubs.

Spirit Rider
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Re: Payroll shenanigans and their implications

Post by Spirit Rider » Tue Oct 03, 2017 1:48 pm

Officers of the company can be personally liable for unpaid tax withholding, FICA, FUTA, etc...

However, the reality is far less certain. As someone who has worked at a few startups with cash flow problems, I am well versed with payroll shenanigans. I never received cash. I have received "net" company checks instead of payroll checks. Sometimes only a few days, up to a couple of weeks.

However, In my case the management were very transparent with what was going on. They would give us a heads up several days ahead of time. We knew what receivables we were waiting on and what date they were due.
Last edited by Spirit Rider on Tue Oct 03, 2017 2:41 pm, edited 1 time in total.

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dm200
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Re: Payroll shenanigans and their implications

Post by dm200 » Tue Oct 03, 2017 2:04 pm

SlowMovingInvestor wrote:
Tue Oct 03, 2017 1:13 pm
ResearchMed wrote:
Tue Oct 03, 2017 1:02 pm
8foot7 wrote:
Tue Oct 03, 2017 12:30 pm
ResearchMed wrote:
Tue Oct 03, 2017 12:27 pm
"Interesting" if unpleasant situation.
(And yes, sounds like a VERY bad prognosis in terms of future employment "stability".)
But a question:
IF a employer with W2 employees (not referring here to 1099 contractors) fails to withhold taxes and/or SS, who is ultimately responsible for those?
Suppose the employer has gone totally belly up by the time this is noticed, with no assets to speak of remaining to seize?
Is the employee responsible for any/all of that non-withheld "withholding"?
RM
The withholder is responsible. The employee won't owe
What if the employer does indeed go belly up, with no recoverable assets to seize?
Is the employee out of luck in terms of Social Security, for example, which depends upon payroll withholding totals?
RM
There is a fairly strict law called the TFRP which makes any 'responsible person' -- (not just the owner, but a senior management level employee) personally liable for such shortfalls. This cannot be discharged in bankruptcy.
Also, note this link
https://www.irs.gov/compliance/criminal ... nforcement
Employees who are concerned that their employer is improperly withholding or failing to withhold federal income and employment taxes should report their employer by contacting the IRS at 1-800-829-1040. In cases where the employer withheld employment taxes but failed to deposit them, or failed to issue W-2s, the employee should contact the employer to request the W-2. If the employee is unable to secure a W-2 from the employer, the employee should complete and attach Form 4852, Substitute for W-2, to their tax return using the best information available to calculate the wages and the withholding. This information can often be secured from pay stubs.
The employer may be legally responsible, but that is no guarantee that the funds would be paid (at least anytime soon) if there are no funds to pay.

downshiftme
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Re: Payroll shenanigans and their implications

Post by downshiftme » Tue Oct 03, 2017 3:11 pm

If you have paychecks that show withholdings, you can reasonably rely on those and assume that FICA and income tax withholdings show have actually been made. If not, the employer will be responsible, although you may be in for a protracted legal dispute before you are held harmless. Keep your records.

However the cash "net" payments are a completely different story. If there is no paystub showing SS withholding or income tax withholding, it's highly likely it was not made or reported. Your SS records probably don't show this pay which will affect your ultimate SS benefits. Your income may or may not be reported and if it is reported without withholding, YOU will be responsible for any income tax owed.

These are the kinds of shenanigans to expect from a company circling the drain and about to go out of business, possibly taking advantage of you on the way down. Looking for a new job immediately would be a good idea.

delamer
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Re: Payroll shenanigans and their implications

Post by delamer » Tue Oct 03, 2017 3:27 pm

downshiftme wrote:
Tue Oct 03, 2017 3:11 pm
If you have paychecks that show withholdings, you can reasonably rely on those and assume that FICA and income tax withholdings show have actually been made. If not, the employer will be responsible, although you may be in for a protracted legal dispute before you are held harmless. Keep your records.

However the cash "net" payments are a completely different story. If there is no paystub showing SS withholding or income tax withholding, it's highly likely it was not made or reported. Your SS records probably don't show this pay which will affect your ultimate SS benefits. Your income may or may not be reported and if it is reported without withholding, YOU will be responsible for any income tax owed.

These are the kinds of shenanigans to expect from a company circling the drain and about to go out of business, possibly taking advantage of you on the way down. Looking for a new job immediately would be a good idea.
I am not convinced that when an employer is doing something shady (like paying part of wages in cash) that it is wise to assume that the taxes showing as withheld on your pay stub are actually being paid.

I'd report the employer immediately to the IRS, and find a new job. This is someone willing to screw his/her employees.

And I hope that the new owner has no control over the old 401(k).

drg02b
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Re: Payroll shenanigans and their implications

Post by drg02b » Tue Oct 03, 2017 3:33 pm

Jags4186 wrote:
Tue Oct 03, 2017 12:18 pm
Run, don’t walk, to a new job.
+1

Best case scenario -- they are cash-strapped and have a poor system for managing their money, as well as are not transparent
Worst case scenario - shady, fraudulent activity is happening

Maybe ask for paystubs documenting the cash pay/withholdings, but definitely find another job.

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Earl Lemongrab
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Re: Payroll shenanigans and their implications

Post by Earl Lemongrab » Tue Oct 03, 2017 3:42 pm

As the paychecks reflect a different amount, it might on the books as a pay reduction. Then there wouldn't be more taxes to withhold. You might want to photograph and document the mysterious envelops of cash.
This week's fortune cookie: "You will do well to expand your horizons." Ow. Passive-aggressive and vaguely ominous.

smitcat
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Re: Payroll shenanigans and their implications

Post by smitcat » Tue Oct 03, 2017 4:40 pm

dm200 wrote:
Tue Oct 03, 2017 2:04 pm
SlowMovingInvestor wrote:
Tue Oct 03, 2017 1:13 pm
ResearchMed wrote:
Tue Oct 03, 2017 1:02 pm
8foot7 wrote:
Tue Oct 03, 2017 12:30 pm
ResearchMed wrote:
Tue Oct 03, 2017 12:27 pm
"Interesting" if unpleasant situation.
(And yes, sounds like a VERY bad prognosis in terms of future employment "stability".)
But a question:
IF a employer with W2 employees (not referring here to 1099 contractors) fails to withhold taxes and/or SS, who is ultimately responsible for those?
Suppose the employer has gone totally belly up by the time this is noticed, with no assets to speak of remaining to seize?
Is the employee responsible for any/all of that non-withheld "withholding"?
RM
The withholder is responsible. The employee won't owe
What if the employer does indeed go belly up, with no recoverable assets to seize?
Is the employee out of luck in terms of Social Security, for example, which depends upon payroll withholding totals?
RM
There is a fairly strict law called the TFRP which makes any 'responsible person' -- (not just the owner, but a senior management level employee) personally liable for such shortfalls. This cannot be discharged in bankruptcy.
Also, note this link
https://www.irs.gov/compliance/criminal ... nforcement
Employees who are concerned that their employer is improperly withholding or failing to withhold federal income and employment taxes should report their employer by contacting the IRS at 1-800-829-1040. In cases where the employer withheld employment taxes but failed to deposit them, or failed to issue W-2s, the employee should contact the employer to request the W-2. If the employee is unable to secure a W-2 from the employer, the employee should complete and attach Form 4852, Substitute for W-2, to their tax return using the best information available to calculate the wages and the withholding. This information can often be secured from pay stubs.
The employer may be legally responsible, but that is no guarantee that the funds would be paid (at least anytime soon) if there are no funds to pay.
The employer is responsible - if the employee was not directly involved in the misuse of fund they will be restored in the employees SS account while they pursue the employer for funds. In no case will the employee lose the benefits if they were not involved in the misuse.

smitcat
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Re: Payroll shenanigans and their implications

Post by smitcat » Tue Oct 03, 2017 4:46 pm

downshiftme wrote:
Tue Oct 03, 2017 3:11 pm
If you have paychecks that show withholdings, you can reasonably rely on those and assume that FICA and income tax withholdings show have actually been made. If not, the employer will be responsible, although you may be in for a protracted legal dispute before you are held harmless. Keep your records.

However the cash "net" payments are a completely different story. If there is no paystub showing SS withholding or income tax withholding, it's highly likely it was not made or reported. Your SS records probably don't show this pay which will affect your ultimate SS benefits. Your income may or may not be reported and if it is reported without withholding, YOU will be responsible for any income tax owed.

These are the kinds of shenanigans to expect from a company circling the drain and about to go out of business, possibly taking advantage of you on the way down. Looking for a new job immediately would be a good idea.
The numbers on your check do not insure you that the funds have been forwarded to SS or anyone else. You can go online to check your SS deductions at the SS site as a confirmation of funds deposited in the account.
There will be no issues with restoring funds that have been misused and not forwarded as long as the employee was not involved - it will typically take a few months after filing the problem. You will get the opportunity to true up and taxes owed without penalties if it was a result of the misuse by the employer.

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dm200
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Re: Payroll shenanigans and their implications

Post by dm200 » Tue Oct 03, 2017 6:16 pm

drg02b wrote:
Tue Oct 03, 2017 3:33 pm
Jags4186 wrote:
Tue Oct 03, 2017 12:18 pm
Run, don’t walk, to a new job.
+1
Best case scenario -- they are cash-strapped and have a poor system for managing their money, as well as are not transparent
Worst case scenario - shady, fraudulent activity is happening
Maybe ask for paystubs documenting the cash pay/withholdings, but definitely find another job.
I lean towards the "worst case" - from some personal experiences.

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Pajamas
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Re: Payroll shenanigans and their implications

Post by Pajamas » Tue Oct 03, 2017 6:31 pm

diomaiuti wrote:
Tue Oct 03, 2017 12:15 pm

Recently (last 2 pay periods), I have found my paycheck failing to reflect all the hours I worked. Instead, after a few days, I find an envelope of $20 bills with my name on it at my desk. It contains the remainder of my pay. The sum reflects deduction of "taxes" at about a 28% rate, roughly
the same as I would have received had it been processed through payroll.

What does this change suggest to everyone? How does the owner benefit from doing things this way? Can I assume he's not paying his half of the various taxes? What is my responsibility in this case? And, bottom line, what would you do in this situation?

Thanks,
Diomaiuti
Sounds like fraud. It is all but certain that payroll taxes are not being paid on the cash portion (neither your nor your employer's share) and you will not get full credit for Social Security. I would be very uncomfortable with it. You could try to document it (video of the envelope and the money in it, sheet with hours worked or time card, etc.), look for a new job, and then report it to the state department of labor and the IRS.

https://www.irs.gov/compliance/criminal ... igation-ci

I was in a similar situation once. Withheld taxes were submitted to the IRS and state equivalent but Social Security taxes were never paid. I was able to get credit because I was getting a check with a pay stub and gave Social Security a copy.

[Edited to remove personal story.]

Honestly, doing away with benefits or any other form of pay cut would be enough to make me leave as a matter of principle.

mainiac
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Re: Payroll shenanigans and their implications

Post by mainiac » Tue Oct 03, 2017 9:09 pm

Run, don’t walk, to a new job.
Run quickly! When I was a young person, a family friend owned a business.
They paid me in cash with a handwritten tally of withholdings.
The funds they supposedly withheld were never remitted to the appropriate fed and state agencies.
It was a hassle for me when it came time to file my taxes.
I seem to recall that the family friend had jail time...

Buford T Justiice
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Re: Payroll shenanigans and their implications

Post by Buford T Justiice » Wed Oct 04, 2017 7:58 am

Save every pay Stub!

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Pajamas
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Re: Payroll shenanigans and their implications

Post by Pajamas » Wed Oct 04, 2017 8:00 am

I was thinking about this some more because of my similar experience years ago. The problem with your pay is probably only one issue. There are likely others that you don't know about. If they will do something like that openly, imagine what they might be doing secretly. Best to steer clear of it completely.

smitcat
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Re: Payroll shenanigans and their implications

Post by smitcat » Wed Oct 04, 2017 8:11 am

I am very familiar with this situation.
- You will get credit for unpaid benefits as long as you were not party to the funds misuse
- You will get credit whether or not they collect from your employer
- Any worker affected will need to file a report with the local SS office
- If these fund changes cause you to fall below minimum wage then another form needs to be filled out
- You will then get back pay but that can take many months or even years (unlike the SS credit) dependent upon the situation
- You can also file as a group if there are a few or more in the same situation.


As an interesting FWIW - one of the owners that consciously messed with the payroll was and is a high worth personal financial planner working for a major company - years after this situation he is still there as a CFP.

SimonJester
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Re: Payroll shenanigans and their implications

Post by SimonJester » Wed Oct 04, 2017 9:58 am

So how do you prove what was paid to you in that cash envelope and what was withheld? I bet come tax time only what you are receiving on the actual pay stubs are going to be reported and all the cash transactions will not.

Run run run
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dm200
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Re: Payroll shenanigans and their implications

Post by dm200 » Wed Oct 04, 2017 11:15 am

Pajamas wrote:
Wed Oct 04, 2017 8:00 am
I was thinking about this some more because of my similar experience years ago. The problem with your pay is probably only one issue. There are likely others that you don't know about. If they will do something like that openly, imagine what they might be doing secretly. Best to steer clear of it completely.
Right.

One possibility is that the business, for many kinds of reasons, is having difficulties and challenges and the owner(s) is/are trying to plug up the resulting "cash flow" crises.

smitcat
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Re: Payroll shenanigans and their implications

Post by smitcat » Wed Oct 04, 2017 11:34 am

dm200 wrote:
Wed Oct 04, 2017 11:15 am
Pajamas wrote:
Wed Oct 04, 2017 8:00 am
I was thinking about this some more because of my similar experience years ago. The problem with your pay is probably only one issue. There are likely others that you don't know about. If they will do something like that openly, imagine what they might be doing secretly. Best to steer clear of it completely.
Right.

One possibility is that the business, for many kinds of reasons, is having difficulties and challenges and the owner(s) is/are trying to plug up the resulting "cash flow" crises.

Or ...it has nothing to do directly with the business itself.
- Owner is having an addiction problem
- Owner is getting divorced
- Owner has partner(s) apparent or silent and there is theft &/or problems

I have seen more than a couple where the business is not so bad but the owners have issues.
In any case you have places to check your withholdings, places to report the problems and methods to protect your interest.

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midareff
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Re: Payroll shenanigans and their implications

Post by midareff » Wed Oct 04, 2017 12:03 pm

Jags4186 wrote:
Tue Oct 03, 2017 12:18 pm
Run, don’t walk, to a new job.
It suggests to me he is cheating on payroll taxes, FICA, MICA and the like. .. and probably cooking the books for some reason only he knows.

bungalow10
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Re: Payroll shenanigans and their implications

Post by bungalow10 » Wed Oct 04, 2017 12:15 pm

My husband had an employer that did that. He would pay cash, "withholding" taxes, SSI, etc. The wages and withholding paid in cash were never reflected on my husband's tax statements. He never got credit for the SS earnings, and he never had a chance to get a refund on the taxes.

Run away. It only gets worse.
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TomatoTomahto
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Re: Payroll shenanigans and their implications

Post by TomatoTomahto » Wed Oct 04, 2017 12:17 pm

bungalow10 wrote:
Wed Oct 04, 2017 12:15 pm
My husband had an employer that did that. He would pay cash, "withholding" taxes, SSI, etc. The wages and withholding paid in cash were never reflected on my husband's tax statements. He never got credit for the SS earnings, and he never had a chance to get a refund on the taxes.

Run away. It only gets worse.
Not only is it likely that you won't get credit for the "withholding," you don't want to work for someone sleazy, right?

ResearchMed
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Re: Payroll shenanigans and their implications

Post by ResearchMed » Wed Oct 04, 2017 12:23 pm

bungalow10 wrote:
Wed Oct 04, 2017 12:15 pm
My husband had an employer that did that. He would pay cash, "withholding" taxes, SSI, etc. The wages and withholding paid in cash were never reflected on my husband's tax statements. He never got credit for the SS earnings, and he never had a chance to get a refund on the taxes.

Run away. It only gets worse.
Several posters above stated that the employee would NOT be penalized (unless she/he was complicit, etc.).

There was some authority quoted, too.

Is this *not* accurate after all?

Or perhaps, did bungalow10's husband not do whatever was needed to claim those SS credits?
(Is there a deadline/statute of limitations or can one get those credits from years before?)

RM
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Re: Payroll shenanigans and their implications

Post by Spirit Rider » Wed Oct 04, 2017 12:53 pm

I believe there is a big difference between cash and net checks and actual payroll withholding where the employer fails to actually submit those.

In the latter you have a W-2 and/or pay stubs indicating that withholding/deductions were taken from your pay, you can get credit for those (I have). In the former you probably are out of luck for two reasons. You were complicit (everybody knows something is up when you get cash or net checks) and you really don't have any proof that either there should have been withholding/deductions from those amounts or in the case of cash, that you really received it.

delamer
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Re: Payroll shenanigans and their implications

Post by delamer » Wed Oct 04, 2017 1:04 pm

ResearchMed wrote:
Wed Oct 04, 2017 12:23 pm
bungalow10 wrote:
Wed Oct 04, 2017 12:15 pm
My husband had an employer that did that. He would pay cash, "withholding" taxes, SSI, etc. The wages and withholding paid in cash were never reflected on my husband's tax statements. He never got credit for the SS earnings, and he never had a chance to get a refund on the taxes.

Run away. It only gets worse.
Several posters above stated that the employee would NOT be penalized (unless she/he was complicit, etc.).

There was some authority quoted, too.

Is this *not* accurate after all?

Or perhaps, did bungalow10's husband not do whatever was needed to claim those SS credits?
(Is there a deadline/statute of limitations or can one get those credits from years before?)

RM
It may be that the employee would not be penalized, but would you want to be in the position of having to prove that you were entitled to Social Security credits based on cash payments and no pay stub?

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Re: Payroll shenanigans and their implications

Post by smitcat » Wed Oct 04, 2017 1:12 pm

delamer wrote:
Wed Oct 04, 2017 1:04 pm
ResearchMed wrote:
Wed Oct 04, 2017 12:23 pm
bungalow10 wrote:
Wed Oct 04, 2017 12:15 pm
My husband had an employer that did that. He would pay cash, "withholding" taxes, SSI, etc. The wages and withholding paid in cash were never reflected on my husband's tax statements. He never got credit for the SS earnings, and he never had a chance to get a refund on the taxes.

Run away. It only gets worse.
Several posters above stated that the employee would NOT be penalized (unless she/he was complicit, etc.).

There was some authority quoted, too.

Is this *not* accurate after all?

Or perhaps, did bungalow10's husband not do whatever was needed to claim those SS credits?
(Is there a deadline/statute of limitations or can one get those credits from years before?)

RM
It may be that the employee would not be penalized, but would you want to be in the position of having to prove that you were entitled to Social Security credits based on cash payments and no pay stub?
I know of more than one situations where the cash payments could not be proved by the "OWNER" of the company.
That made the owner liable for underpaying an employee - the owner was contacted by an attorney on the employees behalf and given a choice.....
1. Remit XXX amounts of unpaid wages and we will supply a full release form excluding you from any pay or tax claims later on or...
2. We will need to pursue these lost wages (much higher than what was actually lost) through the labor department wage claims unit.

This small company decided to 'settle' and hand over the cash...

delamer
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Re: Payroll shenanigans and their implications

Post by delamer » Wed Oct 04, 2017 1:32 pm

smitcat wrote:
Wed Oct 04, 2017 1:12 pm
delamer wrote:
Wed Oct 04, 2017 1:04 pm
ResearchMed wrote:
Wed Oct 04, 2017 12:23 pm
bungalow10 wrote:
Wed Oct 04, 2017 12:15 pm
My husband had an employer that did that. He would pay cash, "withholding" taxes, SSI, etc. The wages and withholding paid in cash were never reflected on my husband's tax statements. He never got credit for the SS earnings, and he never had a chance to get a refund on the taxes.

Run away. It only gets worse.
Several posters above stated that the employee would NOT be penalized (unless she/he was complicit, etc.).

There was some authority quoted, too.

Is this *not* accurate after all?

Or perhaps, did bungalow10's husband not do whatever was needed to claim those SS credits?
(Is there a deadline/statute of limitations or can one get those credits from years before?)

RM
It may be that the employee would not be penalized, but would you want to be in the position of having to prove that you were entitled to Social Security credits based on cash payments and no pay stub?
I know of more than one situations where the cash payments could not be proved by the "OWNER" of the company.
That made the owner liable for underpaying an employee - the owner was contacted by an attorney on the employees behalf and given a choice.....
1. Remit XXX amounts of unpaid wages and we will supply a full release form excluding you from any pay or tax claims later on or...
2. We will need to pursue these lost wages (much higher than what was actually lost) through the labor department wage claims unit.

This small company decided to 'settle' and hand over the cash...
It is great that it worked out in these cases. But there is the hassle of hiring and paying the attorney, and the employees were fortunate that they owners had the money to pay up.

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jazman12
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Re: Payroll shenanigans and their implications

Post by jazman12 » Wed Oct 04, 2017 1:35 pm

8foot7 wrote:
Tue Oct 03, 2017 12:22 pm
This is not good news for you and implies he's not paying his taxes or perhaps even yours. Keep your stubs and document with photos each time this happens.
agree++

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Re: Payroll shenanigans and their implications

Post by smitcat » Wed Oct 04, 2017 1:37 pm

delamer wrote:
Wed Oct 04, 2017 1:32 pm
smitcat wrote:
Wed Oct 04, 2017 1:12 pm
delamer wrote:
Wed Oct 04, 2017 1:04 pm
ResearchMed wrote:
Wed Oct 04, 2017 12:23 pm
bungalow10 wrote:
Wed Oct 04, 2017 12:15 pm
My husband had an employer that did that. He would pay cash, "withholding" taxes, SSI, etc. The wages and withholding paid in cash were never reflected on my husband's tax statements. He never got credit for the SS earnings, and he never had a chance to get a refund on the taxes.

Run away. It only gets worse.
Several posters above stated that the employee would NOT be penalized (unless she/he was complicit, etc.).

There was some authority quoted, too.

Is this *not* accurate after all?

Or perhaps, did bungalow10's husband not do whatever was needed to claim those SS credits?
(Is there a deadline/statute of limitations or can one get those credits from years before?)

RM
It may be that the employee would not be penalized, but would you want to be in the position of having to prove that you were entitled to Social Security credits based on cash payments and no pay stub?
I know of more than one situations where the cash payments could not be proved by the "OWNER" of the company.
That made the owner liable for underpaying an employee - the owner was contacted by an attorney on the employees behalf and given a choice.....
1. Remit XXX amounts of unpaid wages and we will supply a full release form excluding you from any pay or tax claims later on or...
2. We will need to pursue these lost wages (much higher than what was actually lost) through the labor department wage claims unit.

This small company decided to 'settle' and hand over the cash...
It is great that it worked out in these cases. But there is the hassle of hiring and paying the attorney, and the employees were fortunate that they owners had the money to pay up.
The attorney takes these on contingency (NY) but it is only one choice/path the employee could seek.
In one of the other cases the back pay is still being made - 3 years later.
Those employees had to wait almost 2 years for the payments to start and now they are paid out over 1-1/2 years.
The full payments will come out to just about 2.5 times their initial unpaid payroll at the time - that is what the total will be after penalties and interest.

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Re: Payroll shenanigans and their implications

Post by Spirit Rider » Wed Oct 04, 2017 1:54 pm

I have seen the other side of this. Like I said, I have spent 20+ years of my career at very small startups that had cash flow problems at various times. Usually, this was at the startup phase and the management and key employees might be asked to voluntarily defer compensation. However, an occassional payroll problem might crop up.

In one case the employer notified everyone on Monday that a large customer was late in paying a significant invoice. There would not be paychecks on Thursday, but they expected to receive the payment on Monday. The CEO asked that anyone who was in an emergency situation contact him privately and he would advance them the necessary amount.

The company received the payment on Monday, we received net company checks on Tuesday and two paychecks on Thursday. One was the new regular payroll and one was a reconciliation of the net check with all withholding and deductions.

Somebody complained to the state department of labor. They fined the company the equivalent to two payrolls period. That really helped with cash flow :confused . To insure that it didn't happen again, the state labor board wanted a cash flow buffer that necessitated laying off 10% of the employees.

I'm not saying that this isn't a more serious case with no communication and cash payments (which I never saw). However, reporting the employer to the state for a single incident and/or bailing isn't guaranteed to be the best option.

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Re: Payroll shenanigans and their implications

Post by celia » Wed Oct 04, 2017 2:32 pm

SlowMovingInvestor wrote:
Tue Oct 03, 2017 1:13 pm
ResearchMed wrote:
Tue Oct 03, 2017 12:27 pm
IF a employer with W2 employees (not referring here to 1099 contractors) fails to withhold taxes and/or SS, who is ultimately responsible for those?
There is a fairly strict law called the TFRP which makes any 'responsible person' -- (not just the owner, but a senior management level employee) personally liable for such shortfalls.
I want to clarify a blanket statement that was made. If income taxes were NOT withheld as the employee requested, the employee is responsible for paying them when settling with the IRS after the end of the year. It is not a case of fraud or theft if something happened to make the income tax withholding to be irregular, assuming the requested/implied income tax withholding was done for the rest the year.

For example, if the employee put in a change of withholding request, it may tax a few payroll cycles for it to be implemented. If she received a supplemental overtime or bonus check, the income tax withholding may not be correct due to it being additional income to income that was already withheld correctly.

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Earl Lemongrab
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Re: Payroll shenanigans and their implications

Post by Earl Lemongrab » Wed Oct 04, 2017 3:02 pm

ResearchMed wrote:
Wed Oct 04, 2017 12:23 pm
Several posters above stated that the employee would NOT be penalized (unless she/he was complicit, etc.).

There was some authority quoted, too.

Is this *not* accurate after all?
It depends. Like I mentioned, if they change the accounting records to show a lower salary then there would be less SS and income tax withholding due. There the OP would have to argue with the IRS that some of the salary was in cash and should have had deductions. So document that cash coming in.
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Re: Payroll shenanigans and their implications

Post by 8foot7 » Wed Oct 04, 2017 3:34 pm

celia wrote:
Wed Oct 04, 2017 2:32 pm

I want to clarify a blanket statement that was made. If income taxes were NOT withheld as the employee requested, the employee is responsible for paying them when settling with the IRS after the end of the year. It is not a case of fraud or theft if something happened to make the income tax withholding to be irregular, assuming the requested/implied income tax withholding was done for the rest the year.
The raw truth of this whole issue is that (a) if you're employee and having taxes withheld and (b) it ends up those withheld taxes never make it to the government, then as long as you have a series of records showing what's happened, you will eventually be treated as if the taxes had been paid. You will not have to "double pay" and they will go after the employeR who is acting as an agent of the government in taking your money in the name of the government.

Not that it's easy to do and not that it woudln't be a huge hassle, but in the end it is true.

If you are receiving pay without stubs, quit immediately, or demand to become a 1099 contractor and handle it yourself.

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Re: Payroll shenanigans and their implications

Post by Earl Lemongrab » Wed Oct 04, 2017 4:43 pm

8foot7 wrote:
Wed Oct 04, 2017 3:34 pm
The raw truth of this whole issue is that (a) if you're employee and having taxes withheld and (b) it ends up those withheld taxes never make it to the government, then as long as you have a series of records showing what's happened, you will eventually be treated as if the taxes had been paid. You will not have to "double pay" and they will go after the employeR who is acting as an agent of the government in taking your money in the name of the government.
With half of the pay a mysterious envelop of cash with no record, I'm not sure about that at all.
This week's fortune cookie: "You will do well to expand your horizons." Ow. Passive-aggressive and vaguely ominous.

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8foot7
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Re: Payroll shenanigans and their implications

Post by 8foot7 » Wed Oct 04, 2017 7:16 pm

Earl Lemongrab wrote:
Wed Oct 04, 2017 4:43 pm
8foot7 wrote:
Wed Oct 04, 2017 3:34 pm
The raw truth of this whole issue is that (a) if you're employee and having taxes withheld and (b) it ends up those withheld taxes never make it to the government, then as long as you have a series of records showing what's happened, you will eventually be treated as if the taxes had been paid. You will not have to "double pay" and they will go after the employeR who is acting as an agent of the government in taking your money in the name of the government.
With half of the pay a mysterious envelop of cash with no record, I'm not sure about that at all.
That is why I said "a series of records" and "if you're not getting stubs..."

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Re: Payroll shenanigans and their implications

Post by smitcat » Wed Oct 04, 2017 7:46 pm

Earl Lemongrab wrote:
Wed Oct 04, 2017 4:43 pm
8foot7 wrote:
Wed Oct 04, 2017 3:34 pm
The raw truth of this whole issue is that (a) if you're employee and having taxes withheld and (b) it ends up those withheld taxes never make it to the government, then as long as you have a series of records showing what's happened, you will eventually be treated as if the taxes had been paid. You will not have to "double pay" and they will go after the employeR who is acting as an agent of the government in taking your money in the name of the government.
With half of the pay a mysterious envelop of cash with no record, I'm not sure about that at all.
How did you arrive at the "half of the pay" number? Whet I think I read was that in the last two pay periods only some amount that was 'undefined'
had been paid by cash and that at this time the OP had not yet asked for the documentation of those pay periods.

smitcat
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Re: Payroll shenanigans and their implications

Post by smitcat » Wed Oct 04, 2017 7:49 pm

8foot7 wrote:
Wed Oct 04, 2017 7:16 pm
Earl Lemongrab wrote:
Wed Oct 04, 2017 4:43 pm
8foot7 wrote:
Wed Oct 04, 2017 3:34 pm
The raw truth of this whole issue is that (a) if you're employee and having taxes withheld and (b) it ends up those withheld taxes never make it to the government, then as long as you have a series of records showing what's happened, you will eventually be treated as if the taxes had been paid. You will not have to "double pay" and they will go after the employeR who is acting as an agent of the government in taking your money in the name of the government.
With half of the pay a mysterious envelop of cash with no record, I'm not sure about that at all.
That is why I said "a series of records" and "if you're not getting stubs..."
Yes - agreed. And there is nothing stopping the OP from requesting his year to date SS payments so he can compare them to the last full pay stub that he does have from two pay periods ago. I can just about guarantee it will be eye opening in that it will either be fully up to date or there will be a larger problem. The ability to research this is in the hands of Diomaiuti.

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Watty
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Re: Payroll shenanigans and their implications

Post by Watty » Wed Oct 04, 2017 9:05 pm

ResearchMed wrote:
Wed Oct 04, 2017 12:23 pm
bungalow10 wrote:
Wed Oct 04, 2017 12:15 pm
My husband had an employer that did that. He would pay cash, "withholding" taxes, SSI, etc. The wages and withholding paid in cash were never reflected on my husband's tax statements. He never got credit for the SS earnings, and he never had a chance to get a refund on the taxes.

Run away. It only gets worse.
Several posters above stated that the employee would NOT be penalized (unless she/he was complicit, etc.).

There was some authority quoted, too.

Is this *not* accurate after all?

Or perhaps, did bungalow10's husband not do whatever was needed to claim those SS credits?
(Is there a deadline/statute of limitations or can one get those credits from years before?)

RM
The employee would still need to declare the cash payments on their income taxes and lots of other places where they have to declare their income. Failure to do so could be fraud or lots of types of penalties.

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