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Income taxes/statutory employee question - Confused

Posted: Feb 27, 2014

I was one of the people originally with MDI who was sold to Transcend who was sold to Nuance. With MDI, we were statutory employees. When sold to Transcend, we were told repeatedly and often that statutory employee would no longer exist, that we were straight employees. Same with Nuance. Yet my pay stubs say statutory employee and zero federal tax was withheld all year; however, the statutory employee box on the W2 is not checked. So what does this mean?

How is it legal to be told we are straight employees and must abide by all employee rules, yet still have zero federal withholding and now have to pay the federal tax at year's end, which I assume is considered self-employment tax, same as it was as a statutory employee/independent contractor? Am I missing something?

You noticed...SM - Old Anon

[ In Reply To ..]
that there was no federal or state taxes being withheld on your paystubs each pay day for an entire year. Why didn't you contact payroll and get this straightened out right away last January?

It was the same the year prior and I did inquire, more than once. - Confused

[ In Reply To ..]
I was told then we were straight employees, no more statutory employees, yet nothing changed (from a tax perspective - a LOT changed from a work perspective). State taxes were withheld, along with SS and Medicare, same as when I was a statutory employee. My W2 goes to the IRS and they can clearly see no fed tax has been withheld. I just don't understand how it's legal and why no questions are asked about this.

Another MT friend who worked for an entirely different MT company and made several thousands in 2013 had all of $50 in federal taxes withheld, as an employee, and she has no idea how that can be right either.

Unfortunately, since you knew this was - going to impact your

[ In Reply To ..]
end of year tax status, you really should have pushed harder to have it rectified since you knowingly admit no taxes were being deducted. As far as your friend, it may depend on how many dependents she claimed, she should check the records and see what she claimed.

I ended up with a substantial refund (filing jointly), so it was fine. I just didn't know - Confused

[ In Reply To ..]
an employer could insist someone was an employee and adamantly declare no more statutory employees, but then continue to treat them as an SE for tax purposes and not withhold fed taxes, yet not check the box for statutory employee.

I don't pretend to understand the ins and outs of taxes at all, it just seems the IRS would red flag that.

From the company perspective, there was apparently nothing to rectify and it was intended that they withheld no federal taxes. It just doesn't fit with their insistence that we were regular employees.

Also, "pushing harder" on anything with HR, at least for me, was basically impossible. I tried to contact them repeatedly about my 401K as well as the SE status, and I got a reply ONCE regarding the SE status. All the rest were completely ignored, and yes I brought it to my team lead's attention as well, who simply referred me back to the person who was unresponsive.

I personally am finally free of them now and couldn't be happier to have parted ways. Thank you for your responses. I appreciate the input.

It is legal because it does not change how much you owe--sm - anon

[ In Reply To ..]
Whether it is withheld or not, the amount you owe the IRS should come out the same. For a cushion, it could be worth it to elect to have some extra withheld each paycheck. We never have enough withheld automatically for state taxes so Dh has an extra $25 taken out of each paycheck and I have an extra $10 each pay check. We get some of this back which I prefer to finding out I owe money at the end of the year.

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