There are hundreds of IRS forms, but, if your business has employees, two of the most important are Forms W-2 and W-4. Employers use these form to help follow the pay-as-you-go tax system the United States follows. Let’s go over the major difference between W-2 vs W-4.
Tag Archive for Payroll Taxes
The IRS has long held that severance payments from an employer to an employee are wages. As such, they are subject to income, as well as payroll taxes that include social security and Medicare. In a 2014 case (U.S. vs. Quality Stores) a Michigan court ruled otherwise – that social security and Medicare taxes are not due and payable on severance payments. The Sixth Circuit Court of Appeals, surprisingly, upheld the lower court ruling.
This ruling put the IRS in a bind. If the ruling were to stand and be applied nationwide, hundreds of millions of dollars could be at stake. Indeed, in a matter of months, over 3,000 claims for payroll tax refunds were filed with the IRS. All of these claims were disallowed if not coming from the Sixth Circuit. The IRS then appealed to the United States Supreme Court. Read more
The IRS does pursue all taxes equally. The IRS is especially vigorous in going after payroll taxes withheld from wages that somehow don’t get paid to the government. The IRS calls it trust fund money that belongs to the government.
That makes any failure to pay—or even late payment—much worse.
In fact, that’s so regardless of how the employer or its principals use the money and regardless of how good a reason they have for not handing the money over to the IRS. When a tax shortfall occurs in this setting, the IRS will usually make personal assessments against all responsible persons who have an ownership interest in the company or signature authority over the company accounts. Read more