Messed up W2s

[thomtax]

I have 3 clients that all work for the same company. They are technically employees of a staffing and payroll company in Texas. All W2s have same problem.

They show an earnings figure for Federal
They show another earnings figure for Arkansas which is larger than the Federal Figure.

When the payroll company is contacted by employees they will only talk about the tax withheld, telling callers that the amount is correct and that the tax would be different for state and federal. When I talked with them, I told them that we are not talking about withholding, but earnings. Unless there is something I don't know about, it is impossible to earn more in one state than in the US. They seem to be either too stupid to understand what I am talking about or too lazy to do anything about it and it appears as if they are not going to issue corrected forms.

Has anyone ever had this problem?

Any ideas from anyone?

LT

[erchess]

You could always

do a substitute W-2 using the larger Ark income as Federal income as well. If you have pay stubs you could use them.

Before I did that I would send the Temp Service a certified letter on my letterhead with cc to the relevant folks at the IRS stating why they are out of compliance with the law and the penalties for staying out of compliance. My first year in the business a temp agency specializing in short term assignments with daily pay refused for some reason to give a client of mine a replacement for his W-2.. I went to their office with my business card and nothing in writing to back me up. I told them that we would do a Substitute W-2 that would state that they had refused to give a replacement W-2 and that the IRS would call or perhaps even stop by to ask why. They printed up his W-2 with great alacrity. My experience has been that people who are lazy, stupid, or dishonest cooperate with me when I offer to let them explain to the IRS why they do not want to.

[S T]

Difference

How much is the difference between Federal wages and Arkansas wages?

Sandy

[thomtax]

The differences range from $25 to $40, depending on the earnings. The more money earned, the larger the difference.

[S T]

So not a huge difference

between Federal and Arkansas, is there something that Arkansas won't allow as pre-tax, or something that Arkansas taxes as wages that is not taxable for Federal.

Seems odd, but sometimes not all States conform to Federal.

Can any of the employees provide you with a paystub that you can look at to define the differnce between Federal and Arkansas?

Sandy

[joanmcq]

where's KC when you need her?

There's quite a few states where state taxable income could be higher than federal. Here in CA, the state doesn't allow HSA contributions by employers to be deducted from taxable income, so they are added back for state. PA (and other states I can't name offhand) doesn't allow 401(k) and other retirement plan contributions to be deducted from taxable income, so those deductions are added back for state.

Not sure about AR, any AR preparers out there?

[thomtax]

Joan,

These are common laborers in a sawmill. There are no fringe benefits to consider. Nothing special of any type. Just hourly wages that should be the same for Ark and Fed.

And just for the record, I am an Arkansas preparer - that is the reason for my question. I will be talking with DFA tomorrow.

Thanks for your thoughts and for all replies.

LT

[Snaggletooth]

Not unusual

Thomtax, we know you are an Arkansas preparer, and as such, you would be knowledgeable about taxable idiosynchrosies in your state. And the fact that this is a staffing agency with virtually no benefits also reduces the possibility that some exotic fringe is creating the problem.

However, if the staffing agency itself is out of some other state, they may be using taxable differences in their state and assuming the same for Arkansas.

It is not unusual for me to file 10-11 states in skinny Tennessee, and I have seen a number of these differences from state to state. A common scenario is where a state government employee is not entitled to a 403(b) exemption from wages, but because when the employee draws his state pension, it is not taxable. The instruction booklet for Alabama lists some state-to-federal differences, and it takes a whole page.

I would not balk at the encounter of state taxable income exceeding federal. It is quite common.

[ChEAr$]

As to the difference

between state and federal wages, sure it's possible for state to be more, sometimes much
more. Example is Alabama's state teacher's retirement. Teachers pay federal tax on gross
minus contributions into the plan, but pay state tax on the total, because, when they retire,
none of their retired pay is taxable by the state.

The relatively small difference you're talking about here, could very well be a uniform allowance which might be excludable for federal but not for the state. I've seen such.