Payroll Problems

[geekgirldany]

I have a new client that I am preparing three years of tax returns. First two years everything was okay. For 2008 there is a problem with payroll. S-corporation, taxpayer paid two employees during the 4th quarter. Checks are for the net amount. Thing is he did not turn this into the Payroll Processing company (not me). When preparing the return I was comparing W-2s vs what was in QBs. This is when I found the payroll problem. Client says he did not have the money to pay the taxes then. He meant to give the information to the payroll processor but failed to do so. He is wanting to know what to do.

The only thing I know to do is to correct the 4th qtr returns. This will change the W-2s, 941, State forms. That is the only thing that can be done, right? I really don't see another alternative. He suggested for me to amend the returns but I think the payroll processor should do it. What a job.

Would appreciate any input. Thank you.

[ChEAr$]

Simplest way

I have a new client that I am preparing three years of tax returns. First two years everything was okay. For 2008 there is a problem with payroll. S-corporation, taxpayer paid two employees during the 4th quarter. Checks are for the net amount. Thing is he did not turn this into the Payroll Processing company (not me). When preparing the return I was comparing W-2s vs what was in QBs. This is when I found the payroll problem. Client says he did not have the money to pay the taxes then. He meant to give the information to the payroll processor but failed to do so. He is wanting to know what to do.

The only thing I know to do is to correct the 4th qtr returns. This will change the W-2s, 941, State forms. That is the only thing that can be done, right? I really don't see another alternative. He suggested for me to amend the returns but I think the payroll processor should do it. What a job.

Would appreciate any input. Thank you.

to handle it at this point is for you to do whatever is required, whether or not you think that payroll service processor should do it or not.

Oh; and charge for it!

[geekgirldany]

Yeah I know I think I would rather just do it to get these returns finished. Dont know how long it would take the Payroll Processor to fix it.

[Corduroy Frog]

Figgur It Up, Get R Done

I'm probably biased against Payroll Services to begin with, but that's a different issue. I don't think I would involve them. I would prepare amended returns, as the customer has requested.

At this late date, this probably means re-issuing W-2s and the W-3. His final payroll records for 2008 should be correct in his files, at least hard copy. You should also determine whether the cash payments paid to these two employees were (i)simply calculated at their rate without payroll taxes withheld, or (ii) whether he DID reduce their checks for taxes but simply did not deposit the payroll taxes.

If he is a good client, he will discover after paying forthcoming IRS penalties that you don't screw around ignoring payroll taxes when cash is low. Let something else go - a materials vendor, service vendor, payment on the Escalade, etc.

[geekgirldany]

He is new but has been really good to pay. So I will just do them... make the extra money.

I totally agree about paying payroll taxes. I really don't understand him not turning it in. Even if he did not pay them atleast everything would have been reported correctly and he could pay later. I guess people just don't understand. I've got one client that is so behind in payroll taxes. I've mention it here before. It can become a elephant.

[Uncle Sam]

Payroll Problem

I would question why the 2 employees didn't ask about not getting their 2008 W-2s.

[geekgirldany]

They got the W-2s and 4th qtr forms were sent into the IRS. They are incorrect though because he did not turn in some of the checks wrote to the two employees to the payroll processor. It appears to be after the fact processing. I don't think the processor is writing the checks for them.

[Burke]

Sounds like the one I had where the employer gave the employee checks for other things, and did not realize they would be treated as compensation.

Remedy is to:

(1) prepare 941-X for the affected quarter, and
(2) issue W2-C to employee(s).

If 941-X shows underpayment, send check with it to IRS. Grovel under the explanation as to why it happened. Corrected W-2/W3-C goes to SSA. It is a fairly straight-forward process. Employee will have to file amended tax return, of course. Employer should offer to pay you to do it for employee.