I just found out that my employer has not been cutting social security
of my paycheck for las t 4 years!! What should I do?

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Clarification of Question by jndhykb-ga on 02 Feb 2005 19:43 PST

I mean I want to fix the situation ASAP but I am not sure what
potential penalties would turn out to be? And, quite frankly, the very
thought of going thru the entire process sounds scary!!! Please help
someone in distress.........

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Request for Question Clarification by czh-ga on 06 Feb 2005 02:16 PST

Hello jndhykb-ga,

Please clarify your situation. 

Are you saying that your employer hasn't withheld any social security
taxes for you for the past 4 years? Did he give you a W-2?

Did your employer consider you to be a self-employed contractor? Did
he give you a Form 1099 instead of a W-2 each year?

OR

Are you saying that your employer withheld social security taxes but
these deductions have not shown up on your social security earnings
record?

In either case, have you filed income tax returns the past 4 years?


The more you can tell us about your situation, the more likely someone
will be able to answer your question. Thanks.

~ czh ~

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Clarification of Question by jndhykb-ga on 06 Feb 2005 15:42 PST

Further clarification:

I started my job 4 years back on ym OPT (Optional Practical Training
time of 1 year given to Int'l students graduating from Amercian
universities). At that point I was told that I did not need to pay
social security. A year later, when my work visa status changed to H-1
work visa, I was apaprently supposed to pay social security taxes.
However, that is something that my firm should automatically have
started taking out of my paycheck. They never did that and I never
paid any attention either. They have been issuing me W-2s for last 4
years (I am a full time employee and not a contractor). I have also
filed my taxes on time. Butr until very recently I did not even
realize my W-2s never showed any social security tax deductions. I am
not rela tax-savvy and being an internaitonal kid and not knowing the
AMerican tax system does not help either!

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Request for Question Clarification by czh-ga on 06 Feb 2005 16:20 PST

Hello again jndhykb-ga,

Thank you for the clarification. Your situation is complex and finding
the necessary information to give you a complete answer would take a
lot more effort than is appropriate for the price you've set. Please
review the Google Answers pricing guidelines so you can review the
type of answer you can expect for $2. I believe you'll have to adjust
your price if you expect to get a useful answer.

http://answers.google.com/answers/pricing.html

Good luck.

~ czh ~

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Clarification of Question by jndhykb-ga on 08 Feb 2005 21:38 PST

Thanks a lot for your kind advice. I initially filled out the minimum
price just to see what all was out there. I have increased it a bit
now........or else I will ask my HR to eat the costs and fix the
situation.

Thanks again.

I'm not a lawyer or tax professional, so take this with a grain of
salt, but my understanding is that once Social Security is made aware
of the problem, they will want to begin collecting CURRENT SS taxes,
as well as begin making up for the past unpaid taxes.

The make-up amount can be adjusted if it causes hardship, to as little
as $10 per pay period.

If there wasn't intentional fraud on your part, I don't think you'll
be held responsible beyond just the make-up amount.  But again, this
is my educated guess...not a professional opinion.

Is your employer aware of the situation and making the needed changes?
 If you work for a large enough group that it has a payroll or
personnel division, you should definitely have a talk with them about
the situation.

If you're working for an individual or very small company, they may
well be not very knowledgable about SS rules themselves.

Beyond that, I can't really offer any more information, as I'm not
terribly familiar with this area.  But I wanted to at least tell you
what I do know, and to wish you all the best...

pafalafa-ga

Thanks so much! What you said makes lot of sense.........I should talk
to my payroll people. Afterall, its them who messed up. AArrgghhhhh!!

I'm not a lawyer, cpa or tax professional either, but I do own a
payroll company.  Our understand is that the employer is responsible
for withholding taxes from your check, putting up thier share, and
submitting all of it to SSA/IRS.  If they have made an error in this
process, they are liable to the Feds for the error (plus 10% if it
wasn't intentional).

However, the IRS and SSA maintain that they employee is still
responsible for paying the taxes, as the emplloyer is just acting as
an agent of the government.  See:
http://www.irs.gov/compliance/enforcement/article/0,,id=106704,00.html

Thanks so much, sir. That was exactly what I was looking for. Thanks again.

Are you sure you haven't already paid it anyway?

When you file taxes, there's a box for you to enter what was paid into
the social security fund (i.e. for you to copy from your W-2s).  If
the W-2s listed 0.00, you likely copied over 0.00 and by following the
formulas provided in the tax booklet, you would have been assessed the
difference.

Usually your employer pays about 7.5% of your income to SS and you pay
7.5% to SS.  If the employer doesn't cover it, you need to pay the
extra 7.5%, commonly referred to as the "self-employment tax".  Again,
if the W-2 didn't show it as being paid, there's a good chance you've
paid it anyway if you've followed the instructions on the tax forms
properly.

--Joey