Recourse for employer mistakes on payroll?

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JediMisty
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Recourse for employer mistakes on payroll?

Post by JediMisty » Mon Jan 13, 2020 12:37 pm

I'm one of those folks whose MAGI income for Roth IRA purposes lies right at or just above the 122k limit for 2019 for a full Roth IRA contribution. I used every tool at my disposal to lower my MAGI - maximize my 401k pre-tax and catch-up contribution, TLH the small loss I was able, and maximize HSA accounts, re-direct new money in my taxable brokerage to more tax efficient vehicles. I have unrealized gains which prohibit my selling legacy tax inefficient funds in actively managed accounts in Janus and Fidelity. So for the 2020 benefits enrollment, I chose to opt out of the benefit of employer provided Group Term Life (GTL) at one times my salary due to the tax on that benefit for any premium above a 50k insurance. I chose the flat 50k GTL to avoid being taxed on the $800 per year benefit. I have a considerable nest egg and no dependents. My only child is grown and would be very well off should I pass away now, just weeks short of my 62nd birthday. The problem is my employer is still taxing me on the GTL premium even though I waived the benefit. I have contacted payroll four times with the calculations showing that the SS, medicare and Federal taxes are being calculated with the GTL premium. The help desk keeps explaining to me how GTL works and either doesn't understand the math I've sent or is willfully not reading it. In my last e-mail I cc'ed his boss. The IRS website gives 800-829-1040 to call if an employer doesn't withhold taxes correctly or not at all. This seems like an unhelpful course of action as it is the main number for the IRS. Does anyone have any advice if I can't get my employer to correct this? I also noticed that the employer HSA contribution is included in the Federal Taxable income calculation, too, which will affect every employee with an H.S.A.
Last edited by JediMisty on Mon Jan 13, 2020 1:00 pm, edited 1 time in total.

livesoft
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Re: Recourse for employer mistakes on payroll?

Post by livesoft » Mon Jan 13, 2020 12:49 pm

I would call or write the CFO and bypass the help desk and their bosses. If that doesn't work, then I would call or write the CEO.

My spouse's employer's payroll and HR folks are always making mistakes. The above suggestion always works for her to get things resolved.
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chevca
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Re: Recourse for employer mistakes on payroll?

Post by chevca » Mon Jan 13, 2020 12:50 pm

It's only January 13th. Maybe the changes haven't kicked in yet?

bikechuck
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Re: Recourse for employer mistakes on payroll?

Post by bikechuck » Mon Jan 13, 2020 12:57 pm

What is GTL?

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JediMisty
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Re: Recourse for employer mistakes on payroll?

Post by JediMisty » Mon Jan 13, 2020 1:00 pm

bikechuck wrote:
Mon Jan 13, 2020 12:57 pm
What is GTL?
Sorry. Group Term Life Insurance.

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JediMisty
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Re: Recourse for employer mistakes on payroll?

Post by JediMisty » Mon Jan 13, 2020 1:05 pm

chevca wrote:
Mon Jan 13, 2020 12:50 pm
It's only January 13th. Maybe the changes haven't kicked in yet?
His latest e-mail compared my SS/medicare withholding of my last paycheck in 2019 to my first check in 2020. Apples to oranges as the base wage for SS/medicare excludes the Cafe 125 benefits (such as medical, dental, and vision insurance) and my employee premiums for medical and dental insurance went up substantially. He said, "....the only difference is visibility. In 2019, ADP didn't show these calculations and the UtilitPro (new in-house payroll system) shows the GTL premium." He doesn't believe there is an error.

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Re: Recourse for employer mistakes on payroll?

Post by JediMisty » Mon Jan 13, 2020 1:06 pm

livesoft wrote:
Mon Jan 13, 2020 12:49 pm
I would call or write the CFO and bypass the help desk and their bosses. If that doesn't work, then I would call or write the CEO.

My spouse's employer's payroll and HR folks are always making mistakes. The above suggestion always works for her to get things resolved.
Thanks, livesoft. This is a great idea!

surfstar
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Re: Recourse for employer mistakes on payroll?

Post by surfstar » Mon Jan 13, 2020 1:08 pm

Retire.
Solves the payroll mistake problems.

;)

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tfb
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Re: Recourse for employer mistakes on payroll?

Post by tfb » Mon Jan 13, 2020 1:23 pm

JediMisty wrote:
Mon Jan 13, 2020 12:37 pm
The problem is my employer is still taxing me on the GTL premium even though I waived the benefit. I have contacted payroll four times with the calculations showing that the SS, medicare and Federal taxes are being calculated with the GTL premium.
The real question should be whether the GTL premium above $50k is still included in your gross pay. If your gross pay is correct, it won't affect your eligibility for Roth IRA contribution. If only the taxes withheld are calculated wrong, you get it back on your tax return. Paystubs usually have breakdowns for the gross pay. Are there lines for GTL > $50k? If your gross pay includes GTL premium, it's usually done this way (using made up numbers):

Salary 3000
GTL premium +20
pre-tax deductions: -500
Total Gross 2,520

GTL premium offset -20
Tax withholding -800
Total Net: 1,700

If you are taxed on the GTL premium, you would see it added to the gross pay and subtracted from the net pay.
Harry Sit, taking a break from the forums.

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Re: Recourse for employer mistakes on payroll?

Post by JediMisty » Mon Jan 13, 2020 1:40 pm

tfb wrote:
Mon Jan 13, 2020 1:23 pm
JediMisty wrote:
Mon Jan 13, 2020 12:37 pm
The problem is my employer is still taxing me on the GTL premium even though I waived the benefit. I have contacted payroll four times with the calculations showing that the SS, medicare and Federal taxes are being calculated with the GTL premium.
The real question should be whether the GTL premium above $50k is still included in your gross pay. If your gross pay is correct, it won't affect your eligibility for Roth IRA contribution. If only the taxes withheld are calculated wrong, you get it back on your tax return. Paystubs usually have breakdowns for the gross pay. Are there lines for GTL > $50k? If your gross pay includes GTL premium, it's usually done this way (using made up numbers):

Salary 3000
GTL premium +20
pre-tax deductions: -500
Total Gross 2,520

GTL premium offset -20
Tax withholding -800
Total Net: 1,700

If you are taxed on the GTL premium, you would see it added to the gross pay and subtracted from the net pay.
My paystub shows that it is included added to my pay and is included as Federal Taxable Income. MY calculations alos indicate that it is being added for SS and medicare purposes as they are over-charging me for SS/medicare w/h by 6.2% and 1.45% respectively on exactly the GTL premium amount. I've provided my megacorp with the figures illustrating this 3 times.

J295
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Re: Recourse for employer mistakes on payroll?

Post by J295 » Mon Jan 13, 2020 1:42 pm

OP.

As I understand it you would like the employer records to be accurate. So would I.

If I understand your situation, the employer records are inaccurate. As a matter of fact, you are not receiving the GTL benefit. You have waived it.

Thus, according to your calculations, as a factual matter you are entitled to base your actions on the magi as you calculate based on true facts. (The converse would be true also… Say your employer underreported your income… You still are legally obligated to report the actual income received).

You could provide a brief attachment of explanation or otherwise make the appropriate adjustment on your tax return. (i’m not sure the logistics on the tax return of indicating your adjustment… but my case I receive annual 1099s from my former firm and part is self-employment income consulting and part is for my buyout, so I make appropriate adjustments on my schedule C and don’t pay self-employment tax on the full 1099 amount but just on the consulting them amounts ... i’ve done this since 2013 with no IRS issues).

I suspect one objection to proceeding this way is that you want to avoid a disconnect Between employer reporting and your tax return to minimize the possibility of IRS correspondence and follow up. I would want to limit the hassles associated with that also. However, if you can’t get your employer to correct I believe it would be appropriate to proceed as I have outlined.

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Re: Recourse for employer mistakes on payroll?

Post by tfb » Mon Jan 13, 2020 2:05 pm

JediMisty wrote:
Mon Jan 13, 2020 1:40 pm
My paystub shows that it is included added to my pay and is included as Federal Taxable Income.
Then if you have confirmation from open enrollment showing you waived the benefits, just tell them they inflated your gross pay. Maybe they didn't record your open enrollment correctly. When you go into the tax withholding calculation they may be distracted with that. Get the gross pay right and then the tax withholding will fix itself.
Harry Sit, taking a break from the forums.

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JediMisty
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Re: Recourse for employer mistakes on payroll?

Post by JediMisty » Mon Jan 13, 2020 2:13 pm

tfb wrote:
Mon Jan 13, 2020 2:05 pm
JediMisty wrote:
Mon Jan 13, 2020 1:40 pm
My paystub shows that it is included added to my pay and is included as Federal Taxable Income.
Then if you have confirmation from open enrollment showing you waived the benefits, just tell them they inflated your gross pay. Maybe they didn't record your open enrollment correctly. When you go into the tax withholding calculation they may be distracted with that. Get the gross pay right and then the tax withholding will fix itself.
Exactly. I sent them a .PDF of my open enrollment confirmation along with my calculations showing that my gross pay and ss/meficare are wrong. I just keep getting an explanation of what GTL is and being told it's not included on my net pay. Meanwhile, the S.S. and Medicare will also have to be adjusted to the correct amounts in subsequent paychecks as they calculated that incorrectly. As livesoft suggested, I may have to get the CFO or CEO involved to get it corrected.

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Re: Recourse for employer mistakes on payroll?

Post by JediMisty » Mon Jan 13, 2020 2:23 pm

surfstar wrote:
Mon Jan 13, 2020 1:08 pm
Retire.
Solves the payroll mistake problems.

;)
:sharebeer

Makefile
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Re: Recourse for employer mistakes on payroll?

Post by Makefile » Mon Jan 13, 2020 2:40 pm

If all else fails and it gets to the point of a wrong W-2, there is an IRS form 4852 to "override" the W-2 when you file your taxes. But, look up the form and its instructions as there are steps to go through to prove you've done everything possible to get a correct one. Also, I presume filing that form gets the employer in trouble with the IRS.

lstone19
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Re: Recourse for employer mistakes on payroll?

Post by lstone19 » Mon Jan 13, 2020 3:47 pm

JediMisty wrote:
Mon Jan 13, 2020 2:13 pm
Exactly. I sent them a .PDF of my open enrollment confirmation along with my calculations showing that my gross pay and ss/meficare are wrong. I just keep getting an explanation of what GTL is and being told it's not included on my net pay. Meanwhile, the S.S. and Medicare will also have to be adjusted to the correct amounts in subsequent paychecks as they calculated that incorrectly. As livesoft suggested, I may have to get the CFO or CEO involved to get it corrected.
You, of course, need to get them to understand what the real problem is as they keep answering the problem they think you are asking about. I suggest you use the term "imputed income" (from a web source: Imputed income is the value of non-monetary compensation given to employees in the form of fringe benefits. This income is added to an employee's gross wages so employment taxes can be withheld). Specifically, that the company is adding imputed income to your gross pay for a benefit that you waived. Get them to understand the problem is the presence of the imputed income when there should be none.

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Re: Recourse for employer mistakes on payroll?

Post by JediMisty » Mon Jan 13, 2020 6:48 pm

lstone19 wrote:
Mon Jan 13, 2020 3:47 pm
JediMisty wrote:
Mon Jan 13, 2020 2:13 pm
Exactly. I sent them a .PDF of my open enrollment confirmation along with my calculations showing that my gross pay and ss/meficare are wrong. I just keep getting an explanation of what GTL is and being told it's not included on my net pay. Meanwhile, the S.S. and Medicare will also have to be adjusted to the correct amounts in subsequent paychecks as they calculated that incorrectly. As livesoft suggested, I may have to get the CFO or CEO involved to get it corrected.
You, of course, need to get them to understand what the real problem is as they keep answering the problem they think you are asking about. I suggest you use the term "imputed income" (from a web source: Imputed income is the value of non-monetary compensation given to employees in the form of fringe benefits. This income is added to an employee's gross wages so employment taxes can be withheld). Specifically, that the company is adding imputed income to your gross pay for a benefit that you waived. Get them to understand the problem is the presence of the imputed income when there should be none.
Getting the help desk to actually review the information I have sent three times is exactly what the problem is. I'm familiar with the term imputed income. I didn't think to use that term but my throw it in when I (most likely) elevate it to the the next level. Thanks for your input.

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Re: Recourse for employer mistakes on payroll?

Post by LadyGeek » Mon Jan 13, 2020 7:18 pm

Imputed income calculations are defined by the IRS. See: Publication 15-B (2020), Employer's Tax Guide to Fringe Benefits | Internal Revenue Service

Scroll down to "Group-Term Life Insurance Coverage". The calculated amount is defined in "Table 2-2. Cost Per $1,000 of Protection for 1 Month".

How do I know? My employer did the calculation incorrectly and made an end-of-year adjustment. They ate the cost of the additional taxes, including a tax payment "gross up" to ensure the employee didn't pay for their mistake.
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Re: Recourse for employer mistakes on payroll?

Post by cspitzer » Mon Jan 13, 2020 8:43 pm

I am a CPA and a director in the tax department for a large company. I recommend reaching out to the head of your company’s payroll department or the head of your company’s tax department. They should be able to resolve your problem or refer your matter to someone who works for them who can. You probably won’t get anywhere dealing with your company’s help desk regarding this type of issue.

I would be very succinct in explaining your issues, which are:

1. Your company is improperly imputing taxable wages to you for company provided group term life insurance coverage of $50,000 (see page 10 of the 2019 General Instructions to the IRS Form W-2 provides the applicable reporting guidance for group term life insurance).

2. Your company is improperly imputing taxable wages to you for your employer HSA contributions (see page 10 of the 2019 General Instructions to the IRS Form W-2 provides the applicable reporting guidance for employer and employee HSA contributions).

https://www.irs.gov/pub/irs-pdf/iw2w3.pdf

I recommend referencing your supporting computations to prove the above points.

In addition to correcting the improper imputing of these taxable wages to you, your company is required to refund any FICA and income taxes that were deducted from your pay for the required tax withholdings owed on these improperly imputed taxable wages (see bottom of page 35 of IRS Publication 15 (Circular E), Employer's Tax Guide and Reg § 31.6413(a)-1). Overwithheld income taxes are required to be refunded by December 31st. There is no time limit for refunding overwithheld FICA taxes.

https://www.irs.gov/pub/irs-pdf/p15.pdf

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JediMisty
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Re: Recourse for employer mistakes on payroll?

Post by JediMisty » Mon Jan 13, 2020 8:52 pm

J295 wrote:
Mon Jan 13, 2020 1:42 pm
OP.

As I understand it you would like the employer records to be accurate. So would I.

If I understand your situation, the employer records are inaccurate. As a matter of fact, you are not receiving the GTL benefit. You have waived it.

Thus, according to your calculations, as a factual matter you are entitled to base your actions on the magi as you calculate based on true facts. (The converse would be true also… Say your employer underreported your income… You still are legally obligated to report the actual income received).

You could provide a brief attachment of explanation or otherwise make the appropriate adjustment on your tax return. (i’m not sure the logistics on the tax return of indicating your adjustment… but my case I receive annual 1099s from my former firm and part is self-employment income consulting and part is for my buyout, so I make appropriate adjustments on my schedule C and don’t pay self-employment tax on the full 1099 amount but just on the consulting them amounts ... i’ve done this since 2013 with no IRS issues).

I suspect one objection to proceeding this way is that you want to avoid a disconnect Between employer reporting and your tax return to minimize the possibility of IRS correspondence and follow up. I would want to limit the hassles associated with that also. However, if you can’t get your employer to correct I believe it would be appropriate to proceed as I have outlined.
Thanks. That's a good idea. I've made notes before with my 1040 when an employer went under and never sent my information to me and it worked just fine. That's an excellent Plan B.

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JediMisty
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Re: Recourse for employer mistakes on payroll?

Post by JediMisty » Mon Jan 13, 2020 8:55 pm

cspitzer wrote:
Mon Jan 13, 2020 8:43 pm
I am a CPA and a director in the tax department for a large company. I recommend reaching out to the head of your company’s payroll department or the head of your company’s tax department. They should be able to resolve your problem or refer your matter to someone who works for them who can. You probably won’t get anywhere dealing with your company’s help desk regarding this type of issue.

I would be very succinct in explaining your issues, which are:

1. Your company is improperly imputing taxable wages to you for company provided group term life insurance coverage of $50,000 (see page 10 of the 2019 General Instructions to the IRS Form W-2 provides the applicable reporting guidance for group term life insurance).

2. Your company is improperly imputing taxable wages to you for your employer HSA contributions (see page 10 of the 2019 General Instructions to the IRS Form W-2 provides the applicable reporting guidance for employer and employee HSA contributions).

https://www.irs.gov/pub/irs-pdf/iw2w3.pdf

I recommend referencing your supporting computations to prove the above points.

In addition to correcting the improper imputing of these taxable wages to you, your company is required to refund any FICA and income taxes that were deducted from your pay for the required tax withholdings owed on these improperly imputed taxable wages (see bottom of page 35 of IRS Publication 15 (Circular E), Employer's Tax Guide and Reg § 31.6413(a)-1). Overwithheld income taxes are required to be refunded by December 31st. There is no time limit for refunding overwithheld FICA taxes.

https://www.irs.gov/pub/irs-pdf/p15.pdf
This is fantastic advice! Thanks so much for taking the time to spell this out for me!

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Re: Recourse for employer mistakes on payroll?

Post by JediMisty » Mon Jan 13, 2020 8:58 pm

Makefile wrote:
Mon Jan 13, 2020 2:40 pm
If all else fails and it gets to the point of a wrong W-2, there is an IRS form 4852 to "override" the W-2 when you file your taxes. But, look up the form and its instructions as there are steps to go through to prove you've done everything possible to get a correct one. Also, I presume filing that form gets the employer in trouble with the IRS.
Thanks so much!!

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