Can a company I no longer work for as a W2 employee still withhold taxes from payments to me?

Forum|Forum|7 years ago
June 6, 2019
1 reply
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I recently quit my full time W2 employer (gave several week's notice, etc) end of December 2017.

However there were still some bonuses they agreed to pay for work performed during my tenure. These bonuses were to be paid at the end of every month through the end of March 2018.f

On the check I received at the end of January, processed through their payroll company, I noticed the amount was significantly less than I was expecting, because of the taxes that were withheld. Federal, Social Security, and Medicare taxes were withheld, and because it was processed as a bonus, it's a significant amount (30%) of the expected total that I didn't get.

My question is - I wasn't aware this was even legal. I'm not an employee anymore, as I signed termination paperwork at the end of 2017. Wouldn't I just be paid as a regular vendor, where I (vendor) am responsible for submitting taxes instead of getting them withheld?

How do I go about getting back the medicare and social security taxes that were withheld? If at all?

TurboTax Home & Biz Windows

Best answer by MinhT1

The payments to you by your former employer were made under your employment contract and they considered this as your compensation as an employee and withheld federal tax, social security tax and medicare tax.

In fact, this is more beneficial for you compared with them paying you as a vendor or contractor and issuing you a form 1099-MISC at year-end. With a form 1099-MISC, you would have to pay income tax and self-employment tax of 15.3% (which represents the employee and employer share of Social security and medicare tax). As an employee, you only pay the employee share of SS and Medicare tax (7.65%) and the employer pays their share of 7.65%. The federal tax withheld will serve to reduce your tax liability at year-end. So your "gain" compared to being treated as a contractor is 7.65% of the gross amount.

M

MinhT1Answer

Level 15

The payments to you by your former employer were made under your employment contract and they considered this as your compensation as an employee and withheld federal tax, social security tax and medicare tax.

In fact, this is more beneficial for you compared with them paying you as a vendor or contractor and issuing you a form 1099-MISC at year-end. With a form 1099-MISC, you would have to pay income tax and self-employment tax of 15.3% (which represents the employee and employer share of Social security and medicare tax). As an employee, you only pay the employee share of SS and Medicare tax (7.65%) and the employer pays their share of 7.65%. The federal tax withheld will serve to reduce your tax liability at year-end. So your "gain" compared to being treated as a contractor is 7.65% of the gross amount.

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