 | Larry Cheatham
is Vice President of Corporate Services (a division of Eby Corporation). Corporate Services provides Payroll Services to clients in and out of the construction industry. Larry holds a bachelor's degree from Harding University and a Master of Science from the University of Missouri. A resident of the Wichita area since 1978, Larry is a member of the Wichita Independent Business Association, Work Force Alliance of South Central Kansas, a national and local member of the Society of Human Resource Management (SHRM) and a past Chairman of the Maude Carpenter Children's Center Board of Trustees. Contact Mr. Cheatham at (316) 641-3123 or (316) 268-3571. |
Banking & Finance
2004-03-01 15:26:00
Who is liable on withholding?
: I recently heard a story of a company who failed to deduct enough from employees pay for state income taxes. What are the ramifications of such an action and who is to blame? Explain what amount a person should have deducted for their tax returns. How do you ensure that it is enough?
ANSWER: In very general terms there are two types of compensation an employee receives from their employer - direct and indirect. Direct Compensations is: base pay, shift differential, short or long-term incentive pay, recognition and achievement awards. Indirect Compensation is: legally required benefits, disability insurance, hospital and medical benefits, deferred pay, unpaid leave, perquisites. Direct Compensation is taxable when earned and paid.Employers collect the following taxes from each payroll check: Federal income tax, FICA (social security), FICA Medicare and, where applicable, State income taxes. The employer withholds the amount of federal tax as directed by the employee on the Federal W-4 Form. The W-4 Form tells your employer how much federal income tax to take out of each paycheck.State income tax is withheld either by the direction the employee has given in the Federal W-4 Form or by an individual State tax withholding form. Kansas is a state that withholds the tax based on the marital status and exemptions claimed on the Federal W-4 form. If the employer does not withhold enough income taxes and the employee must pay additional taxes on April 15 then the employee should change their W-4. There is no employer liability here.
