Tax trickery?

nakedape

nakedape

Well-known member
I came across an interesting situation with some seniors who've been working part time at an ice cream shop. We went over taxes and filing returns in econ because many don't know they are owed money or how to get it back.

Their W-2s started coming in and one girl noticed a discrepancy. Her direct deposits didn't match up with her W-2. Then two more had hundreds of dollars less, making it look like wages were under-reported. Hmmm.

Adding to the intrigue, the owner is universally regarded as "shady" in hiring and business practice. Changing labels on tubs for sale, shorting hours, etc. Since I encouraged them to file, I feel responsible for following through. Printing 1040s, checking over their forms, basic stuff.

They all report the first and last checks were paper, the rest direct deposits. Then they showed me two different W-2 forms depending on location. (There are three stores.) One is just the company name, the other is company name +LLC.

If total earnings banked don't line up with W-2 totals, isn't that shading payroll tax the company's way? Are the first and last checks going unreported untaxed? In that case I assume they wouldn't be shorted on their refunds.

They aren't being vindictive. The rapport is there and they showed me texts and emails between them and the owner. Nobody was fired or let go. This is what I get for harping on filing for refunds. : |

Before we draft a letter to the owner or report to IRS (harsh!), I thought it would be best to ask random moto people on the interent with some tax knowledge. Many thanks!
 
Smash Allen

Smash Allen

Banned
w-2 reports gross wages...direct deposit amounts are less taxes and withholdings

first and last checks are not direct deposit because first day of work and last day of work rarely fall on pay periods
 
nakedape

nakedape

Well-known member
Smash Allen said:
w-2 reports gross wages...direct deposit amounts are less taxes and withholdings

first and last checks are not direct deposit because first day of work and last day of work rarely fall on pay periods
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Whoa! That checks out. Duh. So as long as the difference is the same as withheld tax totals, they are barking up the wrong tree?

And do they have to file two 1040s if they received two W-2s? Or just combine totals in the appropriate box?
 
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S

Schnellbandit

I see 4 lights!
Another angle to look for is date of payment. If the employee works covering two calendar years, it is possible to schedule payments in a previous year and through shady books alter the reported amount.

There was a scam a few years ago that was caught by the State when the IRS noticed discrepancies with accured time off payments in lieu of actual absences.

Not saying or implying anything, just something to look for if the circumstances support the looksee.
 
nakedape

nakedape

Well-known member
Schnellbandit said:
Another angle to look for is date of payment. If the employee works covering two calendar years, it is possible to schedule payments in a previous year and through shady books alter the reported amount.

There was a scam a few years ago that was caught by the State when the IRS noticed discrepancies with accured time off payments in lieu of actual absences.

Not saying or implying anything, just something to look for if the circumstances support the looksee.
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These kids all work short term and part time, but good to know. Since the employer has had hundreds of students from our school as employees, it's important that they play fair. Kids don't usually know better, and rarely question someone writing the checks (or assigning grades).
 
Smash Allen

Smash Allen

Banned
nakedape said:
Whoa! That checks out. Duh. So as long as the difference is the same as withheld tax totals, they are barking up the wrong tree?

And do they have to file two 1040s if they received two W-2s? Or just combine totals in the appropriate box?
Click to expand...

obligatory None of this is advice, please see tax professional, are these kids dependents on their parents returns?

Pretty much. Just wait until one of them gets a $500 bonus but only sees $200 :laughing

Good extra credit assignment: They can request copies of all their pay stubs and enter to an excel spreadsheet. On the pay stub will be their total gross wages along with a list of all deductions that ends up with their net pay. New row for each pay (check) date. All the net pays should add up to equal their direct deposit amounts plus the paper checks. They should have a pay stub for the paper checks, if they don't I'd be curious.

This is good practice for everyone. The amount of incompetence I deal with related to payroll processing is mind boggling.

If there is an HSA or 401k plan, make sure the amount coming out of your check makes it to the account. This is where 'mistakes' are made. Employer contributions (profit sharing, matching) don't need to be sent out until their taxes are due, however deductions from employee checks are required to be submitted in a timely manner.

Definitely do not submit multiple 1040's :laughing
 
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Eye Heart Pasta

Eye Heart Pasta

Erik changed my life
nakedape said:
And do they have to file two 1040s if they received two W-2s? Or just combine totals in the appropriate box?
Click to expand...

SA already answered it, but to reiterate: Only one 1040 needs to be filed. It's fine to add totals from multiple W-2s and input into one line item on the form.
 
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