Someone (my girlfriend) had the poor sense to work in a start-up salon and the start-up failed (all within the tax year). The business is closed and the owner (who registered with the IRS via an EIN) did not report/deposit all withholding (this is probable as there is no W-2 to be had) :
I extended her return but it is due on October 15th. I know how to file her tax return using the last pay stub and the appropriate IRS self-reporting form in lieu of a W-2; but my question is, will she be liable for payroll and withholding taxes deducted but not remitted by this so-called fiduciary/agent employer (if of course all wages were not appropriately reported/deposited)?
Can you let me know?
Unless your girlfriend was in a position within the company to have some control over the payment of bills, she shouldn't have any problem with the IRS. It is the responsible parties within the company, those who chose to use the money for things other than paying the IRS, who will receive the wrath of the IRS and be hit with major penalties.
The IRS considers those people to be thieves, who stole the employees' tax money, and will act very aggressively to recover it from them. The powerless employees whose money was stolen will not be penalized, and will receive the same credits with the government as if the full amount of the taxes had been forwarded to the IRS.
As you apparently are aware, she needs to attach Form 4852, which is a substitute for the W-2, and include it with her return along with an explanation of what happened. She shouldn't have any problems with the IRS.
One very important note. If your girlfriend did have any power over the company checkbook, she should retain the services of an attorney and work on negotiating the scope of her liability with the IRS.
I extended her return but it is due on October 15th. I know how to file her tax return using the last pay stub and the appropriate IRS self-reporting form in lieu of a W-2; but my question is, will she be liable for payroll and withholding taxes deducted but not remitted by this so-called fiduciary/agent employer (if of course all wages were not appropriately reported/deposited)?
Can you let me know?
Unless your girlfriend was in a position within the company to have some control over the payment of bills, she shouldn't have any problem with the IRS. It is the responsible parties within the company, those who chose to use the money for things other than paying the IRS, who will receive the wrath of the IRS and be hit with major penalties.
The IRS considers those people to be thieves, who stole the employees' tax money, and will act very aggressively to recover it from them. The powerless employees whose money was stolen will not be penalized, and will receive the same credits with the government as if the full amount of the taxes had been forwarded to the IRS.
As you apparently are aware, she needs to attach Form 4852, which is a substitute for the W-2, and include it with her return along with an explanation of what happened. She shouldn't have any problems with the IRS.
One very important note. If your girlfriend did have any power over the company checkbook, she should retain the services of an attorney and work on negotiating the scope of her liability with the IRS.
It is a pleasure to serve you.
Larry Kopsa CPA
