Question for lawyers re: apparent employer tax fraud

[Cream&Crimson]

My girlfriend works for a company that operates multiple restaurants. She got her W-2 recently and noticed that the federal taxes withholding was very low. She didn't think much more about it until one of her coworkers noticed the same thing and asked for a copy of her W-4 only to find the exceptions on the form she had filled out had been changed drastically. They asked a few of their other coworkers and each have all noticed this. They know of five instances so far, and haven't asked any one else. In once case, a lady had claimed 4 exemptions on her form and it had been changed to 14. My girlfriend requested a copy of her W-4 and noted where she had claimed 1, along with an extra amount each pay period. The 1 she had entered had the number 3 written over it in obviously a different handwriting and pen.

I don't know what possible motivation an employer would have for doing this, but it appears to be systemic with them, and certainly fraudulent. These employees are going to end up owing on their returns as a result.

My question is, what recourse or remedy do employees have for this? And what next steps should they take? Who should they reach out to?

Appreciate any guidance anyone can offer.

 

[Marvin the Martian]

My girlfriend works for a company that operates multiple restaurants. She got her W-2 recently and noticed that the federal taxes withholding was very low. She didn't think much more about it until one of her coworkers noticed the same thing and asked for a copy of her W-4 only to find the exceptions on the form she had filled out had been changed drastically. They asked a few of their other coworkers and each have all noticed this. They know of five instances so far, and haven't asked any one else. In once case, a lady had claimed 4 exemptions on her form and it had been changed to 14. My girlfriend requested a copy of her W-4 and noted where she had claimed 1, along with an extra amount each pay period. The 1 she had entered had the number 3 written over it in obviously a different handwriting and pen.

I don't know what possible motivation an employer would have for doing this, but it appears to be systemic with them, and certainly fraudulent. These employees are going to end up owing on their returns as a result.

My question is, what recourse or remedy to employees have for this? And what next steps should they take? Who should they reach out to?

Appreciate any guidance anyone can offer.

It has been over 30 years, but for a few months in 1987 I was working the W2 complaint desk for the IRS (actually was in charge of it). The first thing I would do if I were her is find any check stubs the might have. The big fear here is that they were reporting to her they were paying more in taxes and not doing so (and pocketing the difference). The IRS takes that very, very seriously. I can say that sort of fraud was the worst kind in the mind of the IRS back then and probably is today.

Now for the bad news, it probably makes no difference to the amount of money she owes. The instructions we were given when people were suggesting they needed special treatment for their employers not withholding at all or not withholding the correct amount was to point out that the employee should get a check stub and should know if the amount being withheld is in the ballpark. This was more for people who discovered they were suddenly being treated as independent contractors and having nothing withheld. But I do know there was nothing in my power to give them more time, lower their bill, anything else.

There is a taxpayer hotline she can call, things may have changed. And she should call and report the employer. While she is anonymous, I am sure it comes with repercussions. I had a person call about a business that was clearly taking out taxes from paychecks but gave all the employees 1099s and said they were independent contractors. A couple spouses got together and had the evidence. They were worried though, certainly this would shut down the business. I told them that there was a good chance of that if everything they told me panned out. I was not an investigator so I don't know what happened. But I assume the business would face a fine that would have closed them down.

While I am at it, the fine for not providing a W-2 at all back then was $5. People would call all set to get an employer back for withholding their W2 until some equipment or uniform was returned. They would give me all the information and then ask gleefully what was the worst that could happen. The answer was not what they wanted, $5 per W2. So yep, if they were holding thousands of W2s it may have been a problem.

 

[UncleMark]

IANAL, but one thing I'm 99% certain of is there won't be any recourse regarding the taxes owed. They need to get with a tax professional of some sort and determine what their liability will be and either get to saving up for that prior to April 15 or getting set up on a payment plan when they file.

 

[Cream&Crimson]

Thanks Marv and Mark. They are going to audit their pay stubs to see if there is a discrepancy there, and will also report the employer for falsifying W4 forms.

 

[Marvin the Martian]

Thanks Marv and Mark. They are going to audit their pay stubs to see if there is a discrepancy there, and will also report the employer for falsifying W4 forms.

Good luck with it. I heard some real horror stories when I was at the IRS of people in a similar boat. It is possible to end up owing a lot in taxes, more than one can really afford if not planned for. If she owes more than she can afford, my best advice to it file and pay what she can. The IRS will charge a penalty and interest on the remaining amount. The penalty can be waived if they believe she is acting in good faith, and filing a report should establish that. The interest almost literally takes an act of congress.

 

[UncleMark]

Thanks Marv and Mark. They are going to audit their pay stubs to see if there is a discrepancy there, and will also report the employer for falsifying W4 forms.

Surprised one of the shysters hasn't at least let you know what your legal options might be.

I have to believe there are grounds for a civil lawsuit here. Might see if some ambulance chaser will take it on contingency (assuming the employer has enough money to make it worthwhile).

 

[Cream&Crimson]

Surprised one of the shysters hasn't at least let you know what your legal options might be.

I have to believe there are grounds for a civil lawsuit here. Might see if some ambulance chaser will take it on contingency (assuming the employer has enough money to make it worthwhile).

Don't want to give away who they are here, but they definitely have enough money, which is what is so puzzling about this.

 

[Marvin the Martian]

Don't want to give away who they are here, but they definitely have enough money, which is what is so puzzling about this.

it could be a mistake. Someone may have entered the wrong information into the computer and then went back and tried to change the forms to cover their tracks. I wouldn't discount that possibility. But checking the pay stubs will show if any money was taken out that wasn't reported. In which case, this was some form of theft.

 

[UncleMark]

it could be a mistake. Someone may have entered the wrong information into the computer and then went back and tried to change the forms to cover their tracks. I wouldn't discount that possibility. But checking the pay stubs will show if any money was taken out that wasn't reported. In which case, this was some form of theft.

It's always the coverup, isn't it?

Regardless, I'd be curious about legal options. I guess the stickler would be about damages. If it's just a withholding discrepancy, the taxes are owed, just paid in April vs. during the year. Same amount. So penalties, interest, and any "mental anguish" would be all that's left.

 

[Cream&Crimson]

it could be a mistake. Someone may have entered the wrong information into the computer and then went back and tried to change the forms to cover their tracks. I wouldn't discount that possibility. But checking the pay stubs will show if any money was taken out that wasn't reported. In which case, this was some form of theft.

Could be, but we know it affected at least 5 employees.