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Who's liable for Federal taxes owed when employer doesn't withhold the correct amount?

San Francisco, CA |

Situation: Employer didn't withhold enough Federal taxes from an employee's paycheck throughout the year. The W-4 was used correctly by the employer, but the employer did not use the correct tax table for withholdings on a weekly employee vs. a bi-weekly employee. (Employee worked in California during the tax year and CA state law requires Consultants to be paid weekly which he was.)

Former Consultant filed his taxes and owes a few thousand. He's threatening to sue employer for the amount of the tax liability due to the employer's oversight in the withholdings.

What's the employer's liability in a case like this?

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Attorney answers 1


The employee is liable for a certain amount of taxes based on his income. However, his employer failed to pay to the IRS the amount requested, but the employee got this money. Essentially, the missing withholding payments to the IRS ended up in the employee's hand, so he must remit the amount due to the IRS. If the employee has any interest and penalties as a result of this underwitholding, then the employer would be liable for these amounts. But, I do not believe that the employer is liable for the income taxes due.

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Mr. Fromm is licensed to practice law in PA with offices in Philadelphia and Montgomery Counties. He can be reached at 215-735-2336 or at the email address listed below. He has received a 9.7 rating from AVVO and recently was featured as a 5Star Wealth Manager in the Philadelphia Magazine, November 2009 issue on page 123.
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