18707RE: [tips_and_tricks] Terminating withholding without being terminated
- Nov 22, 2011
A few years back I got one very big employer legal department to not withhold based on a very simple letter. Ultimately it’s not the problem…the problem is they still W2/1099 you and thus in a matter of a few years comes knocking the IRS claiming you owe they 4x what would have been withheld. I would say the HARD part is not the withholding….its in getting them to not 1099/W2 which is very hard if you work for a paycheck.
There is no penalty for them and here is the reason why.
A W4 is entitled a “Witholding Allowance Certificate.” Don’t let the reference on the form to “number of allowances” distract you from the title of the form. The W4 is worthy of an expose on Penn and Teller because it’s a SUPERB version of magician distraction.
The word ALLOWANCE is used in the title to indicate YOUR permission slip….you ALLOW your employer to withhold. It is a certificate because it has a CERTIFICATION in the form of penalty of perjury to let your employer know you definitely want them…allow them….to withhold.
Now you know why there is no penalty because frankly you must give them permission to withhold.
A few years back the IRS made big law and accounting firms the stated…. “partners in the administration and collection of income tax.” Employers are routinely told by the IRS and their own law/accounting firms to exceed their authority and reject altered forms as well as forms that contain what the form reviewer perceives as an incorrect withholding allowance. Most are told to NOT cite law but rather cite POLICY. So pinned down employers will say it is their policy.
They justify termination on the basis of a court case that ruled that an employer could terminate if the employee was taking steps to prevent the employer from paying taxes. In other words they claim the employer has a legal obligation to pay those taxes and disruption of that legal obligation is justification for termination.
Has anyone successfully terminated employer withholding (as the law provides one can do) without being terminated? And if not, how can an employer refuse to terminate a voluntary withholding agreement on request of an employee? I don't think there's any penalty for them, at least I haven't seen it in my searches through titles 26 & 31.
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