My employer is not withholding any federal taxes from my checks

[Rae Baler]

I live in Missouri, I work in Illinois. I am a lab extraction technician for a cannabis manufacturing facility. 

I am not an independent contractor. 

I am having an issue with my employer not with holding ANY federal taxes from my paycheck for two months before I caught the issue. I filed an appropriate W-4 document from the time I was hired and had no issues for a year and a few months. I even printed the documents out and proved there was no issue on my end to only be told I am liable for the money (which I know is true, however it is not my fault for it not being withheld) not paid in and they aren’t concerned. I was met with resistance every conversation I tried to have. 

I have tried reaching out to the IRS for help or to file a report and have no luck getting an actual person or getting transferred to someone else without immediately getting hung up on for “high volume calls”. 

I am frustrated and at a loss for what to do. 

[rjs]

You can fill out a new W-4 to increase your withholding for the rest of the year to make up for the two months that no tax was withheld. That will resolve the issue. As long as the total amount withheld for the year is sufficient, it doesn't matter when it was withheld.

If you do increase your withholding, be sure to submit another new W-4 at the beginning of 2023 to go back to normal withholding, so that you don't have an excessive amount withheld in 2023.

[Mike9241]

prepare and file your return. if there is no underpayment penalty you don't have much to complain about.  you owe but had the use of the money for a substantial period of time.   if there is you can include a letter, signed and dated, with your return which would have to be mailed asking for abatement of the penalty because it was your employer who failed to properly withhold even though it had on file a properly completed form w-4.   You could also e-file and await the penalty notice and then return the notice with the same letter. abatement is up to the IRS. if the IRS abates the penalty all well and good.  if not ask your employer to reimburse you and if they will be including the amount on your next w-2 wages they should increase it because you'll pay taxes on it 

[rjs]

When were the two months that your employer did not withhold federal income tax? I assumed that it was this year, 2022. Mike9241 assumed it was last year, 2021, and you are concerned about the effect on your 2021 tax return that you are filing now. Use whichever answer applies to your situation.

[Rae Baler]

I apologize for not being more specific, you are correct this is for this year 2022. It has been through April-March and is on going. I have updated my W-4 as of today and am waiting to see if it is fixed by my next pay period. 

My concern is on what action to take if my employer still continues to not withhold my federal taxes on going from this point considering how the manner it is being addressed. I was also concerned about how it would effect my taxes next year when I file. I have changed my withholding to be more than usual to hopefully compensate. 

[VolvoGirl]

Is your employer taking out other deductions?  Especially like Social Security and Medicare?  Ask them if you will get a W2 at the end of the year to report your income or a 1099NEC for being an independent contractor.

[Rae Baler]

They are withholding everything but federal. I got a W-2 for my previous year with no issues at all and filed like normal. This current situation is not normal and I haven’t received any answers as to why it is happening. When I looked at the W-4 on file it was also normal, no mistakes or changes.  January and February had federal withheld but March to currently of this year have not been. 

[rjs]

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@Rae Baler wrote:

My concern is on what action to take if my employer still continues to not withhold my federal taxes on going from this point

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If your employer continues to not withhold any federal income tax, you should make quarterly estimated tax payments to make up for the tax not being withheld.

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@Rae Baler wrote:

I was also concerned about how it would effect my taxes next year when I file.

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You will not have a problem with your 2022 tax return as long as you pay sufficient tax during the year, either through withholding or by making estimated tax payments. If you don't make sufficient payments during the year you will end up with a huge payment due when you file your tax return, plus a penalty for not having paid enough during the year.

[Rainman12]

Your employer is acting correctly with defference to Federal and State laws. Consider yourself 'Self-Employed' for IRS purposes, and add 15% to estimated IRS tax payments to cover FICA taxes

[Critter-3]

It is possible your employer will not withhold taxes for the state you live in  just the state you work in so are they withholding any state taxes at all ?   You will file a non resident return where you work and then a resident return where you live and get a credit for the taxes paid to the other state.  If you file early enough you should get the refund from the one state to pay the balance due on the other state.  

And if your income is low enough they may not withhold federal/state taxes at all.