Paying FICA

[ERISA-Bubs]

We just realized we didn't pay FICA upon vesting OR upon payment. We want to go back and fix it. Since the IRS can only audit going back 3 years, are we safe just correcting back to 2013?

We will be paying both the Employer and Employee portions of FICA. Do we have to amend employees tax returns?

Are there any other penalties/interest, etc. that we should be aware of?

[david rigby]

We just realized we didn't pay FICA upon vesting OR upon payment. We want to go back and fix it. Since the IRS can only audit going back 3 years, are we safe just correcting back to 2013?

We will be paying both the Employer and Employee portions of FICA. Do we have to amend employees tax returns?

Are there any other penalties/interest, etc. that we should be aware of?

For this set of questions, advice from your tax attorney will be much more useful than this Q&A.

[hr for me]

I suspect that the employer-paid portion of the employee's FICA would be considered income taxable in the year it is paid for the (ex)employee. It usually is if the employee is still employed and the employer is grossing up any type of payment for taxes. And if so, yes you would need to correct W-2s and tax returns. Is there any chance they already met the Soc Sec part of the FICA Limit in the years of the mistakes? Is there any way you could argue the amount is de minimus? I guess I am asking about how large of an issue it is? How many employees are you having to correct. I wonder if you correct too many if that won't send a huge red flag to the IRS based on your EIN such that they might go back and audit the individual employees for more than the 3 years. How many years are you talking in total?

But I have to agree that this goes beyond this board. And I wouldn't personally rely on anonymous advice such as I have given above.

[ERISA-Bubs]

I suspect that the employer-paid portion of the employee's FICA would be considered income taxable in the year it is paid for the (ex)employee. It usually is if the employee is still employed and the employer is grossing up any type of payment for taxes. And if so, yes you would need to correct W-2s and tax returns. Is there any chance they already met the Soc Sec part of the FICA Limit in the years of the mistakes? Is there any way you could argue the amount is de minimus? I guess I am asking about how large of an issue it is? How many employees are you having to correct. I wonder if you correct too many if that won't send a huge red flag to the IRS based on your EIN such that they might go back and audit the individual employees for more than the 3 years. How many years are you talking in total?

But I have to agree that this goes beyond this board. And I wouldn't personally rely on anonymous advice such as I have given above.

Ok, I will take your advice and consult a tax professional. There are only a few participants, but the amount of money is not de minimis. My understanding is that the IRS cannot audit an individual past the 3 year statute of limitations, so how would the IRS audit individual employees going back further than the SOL?

[hr for me]

Don't know that the IRS would, but honestly don't totally trust they wouldn't somehow find a way around the SOL. And the SOL is 3 years from the 4/15 that the tax return was due. I've heard to keep all documents 7 years because there are times when the IRS can go back 6 years if they find it to be substantive.

But then again I don't really want to find out!

[jpod]

I haven't looked it up in connection with this posting, but I don't think the IRS can assess back FICA (or Medicare) taxes against the employee, even if the SOL hasn't expired. It is an employer 941 matter.