Skip to comments.Taxed By The Boss (State Taxes pocketed by business)
Posted on 04/15/2012 1:25:10 PM PDT by HenryArmitage
Across the United States more than 2,700 companies are collecting state income taxes from hundreds of thousands of workers and are keeping the money with the states approval, says an eye-opening report published on Thursday.
The report from Good Jobs First, a nonprofit taxpayer watchdog organization funded by Ford, Surdna and other major foundations, identifies 16 states that let companies divert some or all of the state income taxes deducted from workers paychecks. None of the states requires notifying the workers, whose withholdings are treated as taxes they paid.
General Electric, Goldman Sachs, Procter & Gamble, Chrysler, Ford, General Motors and AMC Theatres enjoy deals to keep state taxes deducted from their workers paychecks, the report shows. Foreign companies also enjoy such arrangements, including Electrolux, Nissan, Toyota and a host of Canadian, Japanese and European banks, Good Jobs First says.
(Excerpt) Read more at blogs.reuters.com ...
Boy oh boy, as a company, you do this to the IRS, they will come down on you like a ton of bricks and chain your doors shut with very little warning. It’s not like erring or underpaying your Fed income taxes...you’ll get several polite warnings. But they go apoplectic on failure to remit withholding taxes. It should be said that “withholding taxes” on the IRS side include SS tax (FICA) and UI, as well as income tax. On the state side, it’s just income tax. (maybe it’s the state that collects UI, it’s been a while since I did a payroll)
They wouldn’t be doing this if there wasn’t some sort of “permission”...hard as it may be to believe. Anyone in biz knows you do not mess with withholding taxes. You’ll unhinge the IRS big time.
Paychex does this all the time. They deduct the money out of their clients’ payroll weekly, or bi-weekly, and keep it until it is due — quarterly. Then they turn it over to the proper authorities. In the mean time they use it and make mmoney off of the interest.
Anytime a state makes financial concessions to bring a large employer into the state you will see a form of this payment method. If the state paid up front and then the company went bankrupt there would be politicians running for cover, this way the employee gets a job and pays his/her share of commissions for having that job. Much better than living on welfare.
If you want to get around this just declare 15 children and your state taxes drop to zero.
Right, I get that. But if the company never actually sends out the state taxes, and just keeps them, as the article states, was it ever actually state taxes? It seems, well dirty, that they tax their workers state tax then keep it. It seems at least for transparency purposes that they should send in the state taxes and if they have an incentive plan with the state then get that money back as the state cuts a check. It just seems when it is done the way it is currently done like the employee is being charged some sort of an ‘employment tax’. If the company doesn’t pay state taxes.. why are the employees being withheld a state tax. I’m sorry if I’m missing something here, this is an area i don’t understand.
The taxes are calculated, the amount is recorded and the dollar figure is sent to the state treasurer. The company transfers the amount from their outbound payroll account to their ‘inbound concession account’. These accounts have a fixed dollar amount or a fixed date, generally ten years.
The worker doesn’t care how the company was reimbursed for the dollar amount the state promised or what portion / percentage was received each payday. They care that they have a job. Local business is happy that there is a substantial number of people with paying jobs who can buy from them.
The competition was invited to speak during the initial negotiations, the BBB sent their reps, local unions sent their reps, etc. A state politician is not going to invite one corporation into their community at the cost of every competitor.
Well, I don’t understand that either. It already ticks me off that Paychex collects and sits on the taxes collected from my employees. I’d really be upset if I thought that they never paid the taxes at all.
I’ve known of small business owners who have gone to jail over schemes like that.
Paychex put a proposal up before the state and the IRS with the Courts watching. They determined a method of collecting employees taxes, properly recording them in a manner that coincides with the state treasurers office manner of bookkeeping.
Then they determined how to make a set profit while relieving the state treasurers office of posting booklets and pamphlets and forms in numerous statewide offices. Myself, I would rather see private businesses like Paychex than having state employees who don’t know sh!t from Shinola collecting fantastic benefits and pensions while they work a couple of hours a day.
And they relieve me of a lot of work. That’s what I pay them for. But I was shocked when I figured out that they weren’t turning over the taxes that they collect from me at the time that they collect them. But, that’s the way it works. I’m grateful for the service.
I suspect this is different...The employer has to file a 941 (fed) or 940 (forget which) with the Feds and I would bet that Paychex has a serious bond account with the IRS. For the collector of the taxes (in this case, the employer itself) to not remit the money over to an authorized third party I would suspect is a different story. I could be all the way wrong, but I would imagine the Feds would not be happy with the idea of having withholding funds unsegregated in the employers regular checking account.
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