Old  February 7th, 2013, 10:37am     #1
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What if my employer marked me exempt and I'm not?
As I was doing my taxes, I realized that my employer has not taken out any federal taxes this year. I didn't notice this on my paystub since its a new job and taxes were being taken out - I thought federal was too. I had nothing to compare it to so it looked right. It also states an "smt" exemption in the federal tax section. This didn't raise any alarms as i thought it was normal. My w-4 clearly states 0 and non-exempt. (My current 2013 stubs now clearly say "exempt? Yes" (which I got them to correct yesterday) - if my 2012 stubs said this (they didn't) I would have known something was wrong immediately!)

Now because of their error I owe a significant amount of money and am also being penalized by the IRS. I should also add I made enough money for them to take out taxes and my coworkers had theirs taken out. The HR person I talked to says this is my fault since I didn't notice it on my paystub (how is it my responsibility to fix a mistake THEY made, yes, i should've noticed it but they still marked it wrong!) They also say that they're mistake makes no difference as the money in question is the Government's and I owe the government - I signed a document with my SSN on it that states non-exempt, how can they mark me exempt? Does that paper not mean anything?! Can they be held liable? What can I do?
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  Old  February 7th, 2013, 10:50am     #2
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Sorry but I'm with HR on this one. Everyone makes mistakes & sounds like when they imput your info they accidentally made 1. The way I see it the fact that you have received multiple checks from them means you have made several mistakes, each time you received a check it was up to you to verify the information- Especially the first time.

Sorry; I'm sure it sucks, but you've been receiving more than your far share everytime you've cashed a check.

Hope you can get it all straightened out & hopefully not much in penalties.

*Btw- welcome to OLS
I just noticed this was your first post.

Last edited by tracylh0001; February 7th, 2013 at 10:53am. Reason: added

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  Old  February 7th, 2013, 11:51am     #3
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Quote:
Originally Posted by Shan0118 View Post
As I was doing my taxes, I realized that my employer has not taken out any federal taxes this year. I didn't notice this on my paystub since its a new job and taxes were being taken out - I thought federal was too. I had nothing to compare it to so it looked right. It also states an "smt" exemption in the federal tax section. This didn't raise any alarms as i thought it was normal. My w-4 clearly states 0 and non-exempt. (My current 2013 stubs now clearly say "exempt? Yes" (which I got them to correct yesterday) - if my 2012 stubs said this (they didn't) I would have known something was wrong immediately!)

Now because of their error I owe a significant amount of money and am also being penalized by the IRS. I should also add I made enough money for them to take out taxes and my coworkers had theirs taken out. The HR person I talked to says this is my fault since I didn't notice it on my paystub (how is it my responsibility to fix a mistake THEY made, yes, i should've noticed it but they still marked it wrong!) They also say that they're mistake makes no difference as the money in question is the Government's and I owe the government - I signed a document with my SSN on it that states non-exempt, how can they mark me exempt? Does that paper not mean anything?! Can they be held liable? What can I do?
Seek advice from a tax professional, not an online sweepstakes directory website.
Welcome to our forums, BTW. However, your individual tax issues should be discussed with someone whom you can trust.


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  Old  February 7th, 2013, 4:37pm     #4
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Quote:
Originally Posted by Shan0118 View Post
As I was doing my taxes, I realized that my employer has not taken out any federal taxes this year. I didn't notice this on my paystub since its a new job and taxes were being taken out - I thought federal was too. I had nothing to compare it to so it looked right. It also states an "smt" exemption in the federal tax section. This didn't raise any alarms as i thought it was normal. My w-4 clearly states 0 and non-exempt. (My current 2013 stubs now clearly say "exempt? Yes" (which I got them to correct yesterday) - if my 2012 stubs said this (they didn't) I would have known something was wrong immediately!)

Now because of their error I owe a significant amount of money and am also being penalized by the IRS. I should also add I made enough money for them to take out taxes and my coworkers had theirs taken out. The HR person I talked to says this is my fault since I didn't notice it on my paystub (how is it my responsibility to fix a mistake THEY made, yes, i should've noticed it but they still marked it wrong!) They also say that they're mistake makes no difference as the money in question is the Government's and I owe the government - I signed a document with my SSN on it that states non-exempt, how can they mark me exempt? Does that paper not mean anything?! Can they be held liable? What can I do?
While HR made the mistake, it was your responsibility to look at your checkstubs. You did, and even saw they were not taking out federal taxes, so you should have questioned it long ago. I'm sorry, but I do feel that employees have some responsibility to check these things.

There is not a spot to check that says "non-exempt" on the IRS W-4 form, nor a line to write it in, so I am confused about that part of your post. If you actually wrote in "non-exempt" on the line where a person can write "exempt" that might be where the problem started. If you wrote in "non-exempt" on the "exempt" line, and HR accidentally read it as "exempt" and you had also put 0 for deductions, HR should have questioned it as you can't claim 0 (or any number of deductions) AND exempt.
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  Old  February 7th, 2013, 4:41pm     #5
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Employees fill out their own W4s, so you should have filled out your own. I think you should go see a tax professional, as they can help you dispute the penalty with the IRS. If you didn't have any prob the year before with taxes, just because you didn't have enough withheld for 2012, you should actually be OK.

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  Old  February 7th, 2013, 6:05pm     #6
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I'm a payroll processor and while it most definitely sucks, it is your liability to the government. We all make mistakes. I make em too. Many posters here will claim they've never made a mistake on a customer account or a medical patient - but trust me - it happens and we've all done it.

If I make a mistake on a client or employee payroll, it is my job to fix it as soon as possible but not to the extent of paying the employees portion of un-withheld taxes. It would be very rare for our firm to eat a portion of that. Heck, I have en employee who just realized at the end of 2012 that his social security number was wrong on his w2 and we've been doing his payroll for nearly 2 years and issued his 2011 W2. Happily it was not my error.

Every paystub I've ever seen has a line for each tax item and if my federal line showed 0 withheld, I would definitely question it. But I have to admit that I pay very little attention to my paystub other than to make sure the net amount seems right. I couldn't even tell you what my gross is without stopping to do some mental math.

Sorry you're going through this. It would be nice if they at least acted apologetic.



ETA: Now that I think about it, it wouldn't be unreasonable for them to at least cover any interest or penalties. We would likely do that at my firm.
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  Old  February 7th, 2013, 8:01pm     #7
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First of all, an exempt employee refers to the wage & hour laws, not exempt from having taxes withheld. You prepared the W-4 when you got the job. You should have noticed that taxes were not being withheld and brought it to the attention of the payroll office. Every pay stub I ever got had a separate section for federal, state & local, and FICA, so you should have noticed "0" in the federal box and questioned it. If you are one of those people who don't bother looking at their pay stubs, then this is on you. If you did look at your stubs and did, in fact, notice you were not having taxes withheld, then it's still your fault. Now you need to have payroll correct this for this year's taxes.

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  Old  February 7th, 2013, 8:06pm     #8
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Quote:
Originally Posted by Silver Spring View Post
ETA: Now that I think about it, it wouldn't be unreasonable for them to at least cover any interest or penalties. We would likely do that at my firm.
Why do you believe the company should absorb any of the penalties? It may or may not have been their error that caused the non-withholding, but it is entirely incumbent on the OP to have noticed there was an error in the first place and have it corrected in a timely manner.

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  Old  February 7th, 2013, 9:00pm     #9
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Quote:
Originally Posted by realaud View Post
First of all, an exempt employee refers to the wage & hour laws, not exempt from having taxes withheld. You prepared the W-4 when you got the job. You should have noticed that taxes were not being withheld and brought it to the attention of the payroll office. Every pay stub I ever got had a separate section for federal, state & local, and FICA, so you should have noticed "0" in the federal box and questioned it. If you are one of those people who don't bother looking at their pay stubs, then this is on you. If you did look at your stubs and did, in fact, notice you were not having taxes withheld, then it's still your fault. Now you need to have payroll correct this for this year's taxes.
People can be exempt from federal withholding taxes if their income is below a certain level. For example a single person can have about $9,000 in income and wouldn't even have to file (though they may qualify for EIC tax credit so it may be to their benefit to file even if they didn't pay any federal taxes and don't owe any. That's one way to get a tax refund without ever having paid into federal taxes..)
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  Old  February 7th, 2013, 9:08pm     #10
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Yes, the W4 has a place for that, but don't all employers give their employees new forms to fill out every year? We just did them at my chambers, and they just did them at my husband's work.

The W4 is filled out by the employee, not the employer. So, if there's a mistake on the form, it was made by the employee, but it could have been misread by the employer. The OP should ask to see his original W4. What good it will do now, I don't know, but I'm sure he's ultimately responsible.

I'm shocked that someone wouldn't notice what's being held out or not on their paycheck.

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  Old  February 7th, 2013, 9:21pm     #11
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Ive never received a paystub that didnt clearly state federal taxes amount being taken out. Not sure how you would miss that for a whole year. Ive always checked every single paystub for everything. You have to know what you make & a general estimate of what federal taxes should be coming out, its usually one of the highest things being withheld.

Also not understanding why you would have penalties already, dont you have until april to pay your taxes? Ive never not had my taxes taken out automatically so not sure on that.
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