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FICA tax on sick pay


Guest blackacre
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Guest blackacre

A company has been withholding FICA on sick pay beyond the six months of such income that is subject to FICA per Code section 3121(a)(4). The Company acknowledges that it was not entitled to withhold these sums and plans to change its program going forward and to offer refunds of monies collected for past periods -- to a point. The company claims that IRS regulations establish a five year statue of limitations for refunding these improperly withheld sums. I know that there are specific limitation periods for claiming refunds from the IRS. Does anyone know of a regulation that applies to the company in a case like this. Perhaps they are saying that if the company has paid these sums to the IRS and if it can't get the money back from the IRS then the company has no obligation to refund these sums to affected individuals? Are the affected employees left to a state claim against the Company? Thanks for your thoughts.

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I’ve never filed the reports but it is my understanding that employers file quarterly reports on FICA withholdings. They can make appropriate adjustments each quarter.

They should be able to refund the FICA by the next quarter.

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blackacre,

It for the company making the claim to a 5 year S/L to provide the Regulation, otherwise you will never know if you found the exact Reg to which they are referring.

While you can adjust a previous Quarter on a subsequent 941 and the previous year on the first 941 of the following year, there is no easy way to adjust other years that have been closed and W-2s issued etc. These previous years would require new W-2's (W-2c) along with W-3c, 941c and 940c etc etc. There should also be similar State and Municipal forms that would have to be corrected also.

There should be no problem with any S/L being applicable to the employees who file with the IRS for refunds, if it is worthwhile.

If this employer was my client I would tell them to shut up and quickly make the employees whole. This employer would probably have a big problem with both the IRS and the State if this was reported as improper withholding etc.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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