Hello!
I have recently received a letter from an accounting firm being used by a former employer (2yrs ago). The former tax service they used made a mistake marking my Federal Tax Withholding up by $1300.00. I spoke to the service that sent me this letter and she suggested I call the former employer to see about "splitting" this cost (after I expressed that this seemed unfair due to their mistake). Is the employer ultimately responsible? The tax service? Or me? This is a big chunk of money for me as I am not currently working... Can you help?
DonnaFaye

I'm confused, did they report more on your W2 then was actually withheld? If so, I would take the split it offer. Even though they made the mistake, they can demand the money back.

Thank you for the prompt response. Yes, they added $1300.00 to my withholdings that really wasn't taken out. So when processed my family received that much more back. I am not sure what kind of a split may be offered but a suggestion by their old accounting firm was that I should at least ask them to pay the penalties and late fees. They also were surprised that I was just finding out about this now... they shared that the mistake was found a year ago.
DonnaFaye

Hello Donna:

I don't know if the company or the tax service is responsible for the error. And, I don't think it makes any material difference anyway. Ultimately, YOU benefited from it, and when the IRS figures it out, YOU'RE the one whose going to have to pay it back.

IF you can get the employer AND the tax service to split with you, I think that would be a good deal. However, I'll bet they both decline. If you sued them, I think you'd lose.

This is just like a case where a bank makes a mistake and deposits money into somebody's account. Some people think that after some time, the money DOES become theirs. In truth, it never does. So, it really doesn't matter who in the bank made the mistake. It's STILL the banks money.

You owed the IRS taxes. You got too much back in your refund. Nobody is responsible for paying it back other than you.

excon

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Originally Posted by excon

Hello Donna:

I dunno if the company or the tax service is responsible for the error. And, I don't think it makes any material difference anyway. Ultimately, YOU benefited from it, and when the IRS figures it out, YOU'RE the one whose going to have to pay it back.

IF you can get the employer AND the tax service to split with you, I think that would be a good deal. However, I'll bet they both decline. If you sued them, I think you'd lose.

This is just like a case where a bank makes a mistake and deposits money into somebody's account. Some people think that after some time, the money DOES become theirs. In truth, it never does. So, it really doesn't matter who in the bank made the mistake. It's STILL the banks money.

You owed the IRS taxes. You got too much back in your refund. Nobody is responsible for paying it back other than you.

excon

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And the employer and service - and IRS - have an argument that this is a very large chunk of money over and above what was to be withheld. You had some responsibility to notice it.

I would DEFINITELY ask the employer - you really have no direct connection with the payroll service - to pay the interest and penalties. All else aside, their books didn't balance, couldn't have balanced, and nobody noticed - ?

And if I really had a lot of time I'd take the whole argument to Small Claims Court just for the heck of it.