Employer Withholding Error

[zombiexo]

I gave birth in September of 2022; I filled out the newest version of the Federal W4 in October 2022 for dependents where it says multiply the number of qualifying children under age 17 by $2,000. I put 2000. I indicated no other deductions. 

 When I received my W2 for this year, I made about 57,000, and the federal income tax withheld was $13.48. Weirdly, they did withhold my Social Security and Medicare taxes. 

I immediately reached out to my HR/Compensation department, and their response was, "You last updated your W-4 form in late 2022," and they told me how to find my W4. When I told them it was filled out correctly, they said basically that I could adjust it for 2024 and gave me links to the withholding estimator on the IRS website. They haven't responded to requests for follow-up since.

So, I guess I'm wondering If I can hold them liable for anything or if it's just on me for not noticing sooner. I obviously realize I'll end up owing the IRS, but should my employer face repercussions for making this large of an error?

[Vanessa A]

No, you cannot  hold your employer liable for withholding too little taxes.  Since the taxes were your responsibility, it would have been your duty to contact them in the beginning of the year when you realized they were not taking anything out.  

Social Security and Medicare taxes are standard across the board.  There are not special deductions or other considerations.  Everyone who is employed and subject to FICA withholdings has 7.65% withheld for SS and Medicare whether you have no kids or 15 kids. 

Now if they were not properly withholding your FICA taxes or withheld taxes and did not make the payments to the IRS then they could face penalties, but there are not repercussions for them not withholding enough for you. 

[Opus 17]

1. You should have known all along that you were not having any federal income taxes withheld by checking your pay stubs.  You had the whole year to raise this as a concern.

2. To know if the employer made a mistake with the withholding calculation, you would have to look at one of your individual pay stubs to see what the withholding calculation should have been, using the tables and instructions in IRS publication 15-T.

3. The W-4 requires that you take into account any second jobs you had, or if you are married, the job or jobs your spouse has.  If you are married, and did not take your spouse's job into account, that could result in very low withholding for your job (that would be correct in a married household with only one working spouse, but is too low if both spouses work).  Without seeing the actual W-4, your pay stubs, and your spouse's info (if any), it's impossible to see where the mistake was made.

4. You may want to file a new W-4.  Try using the IRS estimator to figure out what you should actually claim. 

https://www.irs.gov/individuals/tax-withholding-estimator

5. If Turbotax wants to add an under-payment penalty, try and decline the offer.  Pay as much as you can when you file, and pay the rest as soon as you can.  If the IRS sends you a bill for a penalty, you can apply for a waiver (abatement) for cause or if this is your first time owing a penalty. It is harder to apply for penalty relief if you have already voluntarily paid the penalty.

6. If you owe taxes and can't pay in full right away, don't ask for a payment plan unless you know it will take past August to pay it off.  The payment plan application has a non-refundable fee that is more than the interest and late fees you would pay as long as you can pay off the tax before August.  If you can't pay in full right away, tell turbotax you will "pay by check".  Pay as much as you can electronically at www.irs.gov/payments, and then keep paying whenever you can to pay it off.  Make sure to select "2023 form 1040" as the reason for the payments.