My Spouse's Employer Stopped Deducting Taxes From His Pay

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Mark Cappel

UpdatedFeb 19, 2015

My husband's employer recently stopped deducting taxes from his paycheck. Does Obama have a tax plan to account for this?

My husband works for a car dealership and recently noticed they are taking very little, almost nothing out of his check for taxes. He inquired about this and was told there is kind of new tax bill that Obama is proposing that hasn't yet been passed that would prevent him from having to pay any additional taxes. This doesn't sound right to me. Do you know anything about this?

Oh, yes. I have heard of this. It is a special tax bracket for tax evaders. It comes with a free stay at a federal minimum security prison.

Assuming for a moment that President Obama has proposed a magical budget where the middle class pays little or no income tax -- which he has not, by the way -- the fact remains that proposed budgets are not laws. Under the US Constitution, Congress creates the federal budget and the President either signs the bill or stamps it with a veto. Only when Congress votes and agrees to a law and the President sign it does the law take effect.

I can assure you that my coworkers and I at Bills.com are still paying the same amount in income tax that we did a year ago. If there was a special income tax moratorium Bills.com and other personal finance Web sites would be all over this story.

I think there are two explanations for so little money being deducted from your spouse's paycheck. If your spouse is earning very little, he may be in a tax bracket where little is deducted. However, because you wrote that you did a side-by-side comparison of his paychecks and did not mention that his income has dropped, it's safe to assume that he is earning what he did before. Also, because the employer concocted such an outlandish story for the change in the amount of taxes removed from his paycheck, it is reasonable to conclude there is a dishonest reason for it changing the deductions.

My guess is that your spouse's employer is failing to deduct the proper amount of taxes from employees' paychecks in an effort to preserve cash. The employer is doing this because an equal amount of FICA tax must be paid by employers. This is an short-sighted strategy, a violation of federal law, and an ominous sign that your husband's employer is nearly insolvent.

This begs the question, "What should your spouse do about it?" At minimum, he needs to assume the IRS will eventually catch up to the employer. If the employer is still in existence when this happens, it will face penalties. The employees should start setting aside their own savings with each paycheck to pay the IRS the unpaid taxes owed.

If I was your husband, I would start circulating my resume. I know it is a terrible time to be in the car business, but I fear your husband and his coworkers are about to join the ranks of the unemployed.

I hope this information helps you Find. Learn & Save.

Best,

Bill

bills.com