Should I start looking for a new job?

March 22, 2006 3:42 AM

Is my new boss pulling one over on me?

I started working for a mid-sized company in late January. Since then I have been getting weekly paychecks--handwritten paychecks, with no taxes taken out.

I was told it would take a few weeks before my direct deposit would kick in, so, even though I thought the tax thing was odd, I decided to wait until then to say anything. Well, a month went by and still no direct deposit, still no taxes taken out. I was then told that the direct deposit system had changed and it would take around two months for that to take effect.

Obviously, something doesn't seem right to me as far as the tax situation goes, and every time I have brought it up with the payroll dept., I have gotten the brush-off.

It is almost as if I were being treated as a freelancer, but when I was hired, my boss gave me no indication of that. When I was hired, I was informed of all the benefits, insurance, etc. I filled out tax forms and employment forms and it was never stated that I would be working for freelance.

I was told that there was a 90 day probation period in which either I or the employer could choose to end the relationship, and none of my benefits kick in until after that 90 day period.

There were six of us hired at the same time, except for one guy who was hired about a week before the rest of us. His checks started having taxes taken out and his direct deposit started about three weeks into the position. The other four are experiencing the same thing I am.

I really like my new job, and I don't want anything to jeopardize it, which is another reason I am hesitant to "cause any trouble" in the off-chance they are hoping to weed some of us out. I really don't want to leave this job, but this is making me really nervous. What should I do?

So what is going on here? My biggest fear is that they will keep us for the ninety days, pay us as freelancers, and then cut us loose. Can they do that when we were specifically told upon our hiring that we were being hired for a full time + benefits job? Is it just laziness on the part of the payroll department? Should I start looking for a new job?

posted by anonymous to work & money (43 comments total)

Should I start looking for a new job?

Yes. An employer shouldn't be mucking around with your paycheck. The fact that they are, and won't give you a straight answer about it, shows a deep disrespect for you. I'll leave the issues of labor laws to others less hesitant about speaking out of their asses ;)
posted by stupidsexyFlanders at 4:32 AM on March 22, 2006

Sadly, I think you should start job hunting.

Direct deposit IMHO has nothing to do with how your paycheck is cut in terms of taxes etc. Direct deposit is a minor and secondary issue for the payroll department -- do we print out a check or send it to some bank number.

IANAL but I think things are not looking good. Be prepared.
posted by bim at 4:41 AM on March 22, 2006

bim is right. It doesn't matter whether they pay you by printed check, handwritten check, direct deposit or cash on the barrelhead. If you're an employee, they need to withhold for you.

Either they're paying you and not reporting it to the IRS, essentially making you an under-the-table employee — in which case paying you by check is rather foolish — or they're planning on treating you as a contractor. (Or, I suppose, they're completely clueless about tax law.)
posted by nebulawindphone at 4:57 AM on March 22, 2006

[this is bad]
posted by I Love Tacos at 5:04 AM on March 22, 2006

Call the IRS. Call the Wage & Hours Division (or equivalent) of your state AG's office. Call the state Tax Collector (or Department of Revenue or whatever). Even if they are not deliberately trying to screw you, they are making a large mess out of your taxes, and if you contact the tax people, they will be less likely to blame you. The fact that you filled out W-4 forms means the employer should be taking out taxes. If he's not, he's screwing up.
posted by Kirth Gerson at 5:16 AM on March 22, 2006

"They" being the employer, not the tax agencies, if that wasn't clear.
posted by Kirth Gerson at 5:17 AM on March 22, 2006

It *could* be true, but I'd start looking for backup employment anyway.

Semi-relevant story:

I once worked for the Canadian Air Cadets, a semi-autonomous branch of the Canadian Armed Forces. They were supposed to pay us after two weeks. Six weeks in I was actually handed a few thousand dollars in cash because they just could not get the direct deposit to work for some reason. I had to keep it in my map case (I was a trip leader / canoe instructor) because it was my only possession that was likely to keep things dry in our crap tents. And even then I had no where to lock the money up, since we were living in tents.

In the end we discovered that the people responsible for doing our pre-employment paper work had forgotten to do security checks on any of us (since we were working with kids). So they could have paid us, but then the bosses would have asked to see the security check results first. Basically they were just covering for their own mistake at our expense. So perhaps there's something like that going on with you as well. Perhaps it's not the pay system per se, is there any other reason your boss might not want you showing up in the system yet?
posted by tiamat at 5:50 AM on March 22, 2006

I'm also wondering if they are trying to avoid paying into the unemployment insurance program. And will this payment method prevent the poster from getting unemployment benefits if the job disappears after 90 days.

The employer also may be on shaky ground as far as paying his/her worker's comp premiums go.
posted by bim at 5:51 AM on March 22, 2006

Sounds to me like the employer is planning on dumping all of you after 89 days, and doesn't want to treat you as employees lest you file unemployment claims.

Welcome to the new economy.
posted by jellicle at 5:55 AM on March 22, 2006

Get that resume warmed up. If they won't explain the paycheck issue, and they should since it's your money, or your real status regarding your position, you are on shaky ground. I second kirth gerson's recommendation and also suggest that you get out of there. Sorry...
posted by ashbury at 5:55 AM on March 22, 2006

Either the employer is up to something shady, in which case you're probably screwed, or the employer is so witless they can't even organize a payroll properly, in which case you're probably screwed.
posted by normy at 6:00 AM on March 22, 2006

Another semi-relevent story:

When I worked for a company that was "in some trouble," the clue that we were definitely about to go out of business was the fact that we began getting paid in handwritten checks -- and later, cash. (But our taxes were still being taken out!) Apparently the account ADP pulled payroll from was bankrupt, so the money to pay employees was being pulled from other accounts in a pathetic financial shuffle. It definitely sounds like you're being paid from a not-payroll account, for whatever nefarious reason. Get ready to bail, one way or the other.
posted by junkbox at 6:02 AM on March 22, 2006

It sure sounds like they consider you a freelancer. The tax thing sounds like them getting around shelling out for unemployment and health insurance. But they did mention the 90-day probation thing up front, and you're not quite at 90 days yet. Wait it out, keep pushing (diplomatically) and see what happens. Many employers hang these things over empoyees' heads to keep them in "slave" mode and it stinks. You deserve better.

By the way, you should always have a Plan B in any job. It's good to be constantly networking, for both practical reasons (in case you suddenly get dumped) but also for mental health reasons ("my talent is valued outside of this company"). Good luck.
posted by terrier319 at 6:08 AM on March 22, 2006

It is amazingly trivial to do a payroll check properly, even without the aid of software (believe it or not!). It may or may not be equally trivial for them to account the transaction properly, within the limits of their system.

You didn't specify whether you were being paid as if taxes and FICA had been withheld. In this case you are better off if not, if they aren't accounting for it properly. Do take a photocopy of your check, just for your records, in leu of a proper stub.

As the others indicated, keep your resume ready and your ear to the ground about a better position. People who play this way can't be trusted. It is all too easy to get hired by shady characters.
posted by Goofyy at 6:26 AM on March 22, 2006

IANAL.

You need to start pursuing legal options, NOW, so that the IRS doesn't come after you with penalties down the road. Send an email to your boss and the head of payroll, cc'ing yourself (better yet, bcc your non-work email) detailing your situation, and asking why no withholding has been taken out. You should always have written documentation distancing yourself from any ill intent.

And find another job. And call the IRS.
posted by mkultra at 6:30 AM on March 22, 2006

You don't say whether you're in the US or not, but if you are you're also losing out by not having your employer pay FICA. Your employer should by making Social Security payments both through withholding and as employer-side payments. Social Security uses your 30 highest years of reported income to calculate your Social Security payout, so without your employer making contributions for you, you are losing quarters of eligibility.

There's also an issue of, if working at this company is a long-term career move for you and you're relatively young, you not having enough quarters of earnings to even qualify for Social Security.

As everyone else recommends, you need to start looking for another job. This employer is pretty clearly violating the lay with regard to your payment, and that's a bad sign.
posted by HiddenInput at 6:45 AM on March 22, 2006

It's important to note that even though your employer isn't taking taxes out as they should be, you are still responsible for them as far as the IRS is concerned. So come tax time you'll owe whatever taxes were not paid so far. You might want to open a separate account and put 33% of every paycheck into it so you have the money when it's time to hand it over to the IRS.
posted by misanthropicsarah at 6:54 AM on March 22, 2006

I was told that there was a 90 day probation period in which either I or the employer could choose to end the relationship, and none of my benefits kick in until after that 90 day period.
I think this explains it all, really. Right now, you are, for all intents and purposes, a contractor. Best be saving out your own taxes.
You don't exactly say what you were hired to do. Were you brought in for a specific project? My guess is they estimate that the project should take about 90 days. Once done, they can you. I've seen this done to others. I have one friend who has been contracting for a software firm for over a year. They keep dangling actual employment in his face, but never quite coming through with it.
Employers are getting good with these tactics. People are desperate for jobs and employers don't want the burden of benefits. Wackiness ensues.
posted by Thorzdad at 7:31 AM on March 22, 2006

You are being treated as a 1099 employee. This will bite you in the ass at tax time, because unlike a regular W-2 employee, you will be responsible for the full social security deduction instead of the half you pay as a W-2.

Treating you as a 1099 has a lot of benefits for the employer and not very many for you. The IRS has a test to see if you are a W-2 or a 1099, with questions such as can you set your own hours, do you use your own tools, etc.


If you decided you wanted to be a 1099 employee, you would keep track of your deductable expenses related to the job so you have something to offset the income at tax time. Do you have skills that would get you other 1099 type work? It's kind of a hassle to deal with 1099 stuff unless all or most of your income is coming in that way and you have your system for accounting set up that way.

This employer is taking you for a ride, in my opinion. I'd call the IRS and the local labor board. The labor board can investigate and get your taxes paid by the employer so you aren't left holding the bag at tax time. If they aren't paying your taxes, they probably are doing a lot of other shady things, and you don't want your name or social security number being used to cover any of that. Good luck with it. Get your other 90 day pals to also file Labor Board paperwork if you can.
posted by 45moore45 at 7:49 AM on March 22, 2006

its good to be suspicious, but since you say you really like your new job, tell your boss to be straight up with you. then go to the next level or go straight to the HR department. probation periods are common, but being treated like that isnt common.
posted by yeahyeahyeahwhoo at 8:22 AM on March 22, 2006

just had to chime in and say I had just about the exact same situation- brush-offs, "check back in x weeks", "the system changed"- and the IRS eventually came after me for a lot of money. I managed to straighten it out, but it took a year of faxes, copies, letters, calls, and forms.
posted by paul_smatatoes at 8:41 AM on March 22, 2006

Three months of 1099s is shady, but not something you need to call tax boards and bring the legal hammer down on. If you like the job, keep doing it and doing it well, but start looking for a new job on the side in case it doesn't work out. From the description, I'd say you have a 75% chance of being cut at the end of the probation.

It's remotely possible this will all blow over and you'll have a normal position soon -- I was assured in an interview at a major university that I was getting "full medical coverage" that turned out to be only a HMO, not dental or vision. I figured the word "full" included that, and even my boss (the guy that interviewed me) was surprised to find out. It turned out I was designated a "364 day employee" that was fired one day a year and rehired the next, so that I didn't, by law, require full medical coverage (I was working for them less than a year, over and over). This was a big public college too. They changed my employment status and I got my coverage but I was surprised by the legal loopholes big companies jump through to save money.
posted by mathowie at 8:42 AM on March 22, 2006

I do not believe that the probation remarks in any way account for these irregularities. Probationary employees still get taxes taken out. That's not a benefit; it's an employer obligation. Anon cannot be a contractor unless he and the employer signed a contract. (Duh)

Document everything in sight, and call the authorites. This is just not right.
posted by Kirth Gerson at 8:44 AM on March 22, 2006

document everything they're doing ... i'd bet not withholding taxes is illegal in your case ... wait until the 90 days are up to see if you keep the job ... if you keep the job and they start playing straight with you by withholding what they should, you may want to let it go

if they let you go, you should call the irs, state agencies and everyone else whose regulations they're violating and have them busted

even if they keep you, you should consider other employment ... remember that the way a company treats its employees is often the way they treat their customers ... and these people aren't ethical
posted by pyramid termite at 9:02 AM on March 22, 2006

As I think others made clear, the real concern here isn't the taxes - you pay the same either way, though doing quarterly estimated payments is a pain in the ass. It's the social security that's the problem since your salary as a regular worker is predicated on their paying 7.5% that is NOT withdrawn from your bottom line.

So now you're going to have to take 15% out, not 7.5% as would normally be done for you automatically. So they're short-changing you 7.5%.

The unemployment insurance payments are also a potential concern.

These guys could be perfectly well-meaning but just incompetent fuckups, but really, is that any better an answer? Get your resume in order.
posted by phearlez at 9:18 AM on March 22, 2006

I gather that all your communication so far has been with your boss? I suspect that if there is a problem, it's that he's hired(?) you without going through the proper channels and without the knowledge of the payroll/HR department.

Here's what I think you should do: Innocently wander into the payroll or HR department and ask what can be done to clear up this situation. Keep up the innocent approach as you explain what you were told and what has happened since and as they respond (e.g. there must be some mistake, etc. -- it won't appear to occur to you that anyone might be doing anything wrong).

If your boss is breaking the (company's) rules, then this is when he catches hell (and you don't have much to lose by doing this -- in fact you have more to lose by letting the situation continue). But if he's not (whether because the problem is resolved or because the whole company is crooked), then you haven't accused anybody of anything or burned any bridges (yet).
posted by winston at 9:31 AM on March 22, 2006

I'll echo the sentiments of others here: look for a new job and report your current employer to the IRS and your state's department of revenue. They may not be breaking laws but they're treating you shoddily, and in such a manner that you may be held accountable for their financial shenanigans.

Also, you'll probably want to work with a financial professional when you prepare your taxes for this year.
posted by Verdant at 9:31 AM on March 22, 2006

winston, from the original post:
every time I have brought it up with the payroll dept., I have gotten the brush-off.

They're not going to do right.
posted by Kirth Gerson at 9:43 AM on March 22, 2006

Hm. Well, unless there's someone else you can go to, I say: Run away!

(and put aside 25 to 30 percent of the money they have paid you, in it's own savings account from which you will not make a withdrawal until you file your income taxes a year from now)
posted by winston at 9:56 AM on March 22, 2006

Bail out, this one's going down.

I suspect what's happening is they're not reporting revenue in order to dodge taxes themselves, and in doing so can't pay you in a more above-board way or the dodge would become apparent to the tax people.

Direct deposit is really simple and fast to initiate, and even in its absence taking taxes out isn't a big deal.

They're doing a dodge. Get with you local tax people and report them, and you may find yourself getting a bounty for your troubles.
posted by Elvis at 10:33 AM on March 22, 2006

I don't see why you would automatically assume the worst. All this speculation about tax evasion seems pretty unwarranted. These sorts of fuck-ups and delays happen all the time in mid-size/large companies. At another job, it took them about 6 months to set up direct deposit for me. In the end I had to schedule a meeting with the freaking CFO.

Your best bet is to work together with the other four guys to figure out exactly what's going on. Try asking around and try to determine if the company has any history of doing this sort of thing. (I'd be surprised. Any company with a few hundred employees is usually smart enough not to fuck around with this sort of stuff. Though your definition of mid-size company may be different than mine.) Your best bet is to ask simple, direct questions and to do so in writing. Ask both your boss and the HR people (1) why they aren't removing taxes (2) does this make you a non W-2 employee (3) why your direct deposit hasn't been set up (4) what can you do to help the situation. Talk to the other four new-hires and have them all submit the same questions, in writing. Try to target different HR people if you can. Once you have your answers, print them out and compare. Wait a couple of weeks and if the handwritten check bs continues, then go to the boss in person and tell him your concerns. Try to phrase it in polite language; don't be accusatory, just tell him you're afraid there's been a misunderstanding and people think you're freelancers when you're not. Again try to get the other new-hires involved--it's always better to act as a group.

If you do determine that that you're being scammed then your best bet is still to play along with the scam for the 90 days and see what happens. Calling in the authorities now, with no conclusive evidence, is very premature. Even if you have the strong suspicion of foul play, it'd make sense to continue receiving paychecks and then filing a complaint once the 90 days pass and you're fired. It's good to be prepared though, so yeah, put your resume back out there.
posted by nixerman at 10:59 AM on March 22, 2006

and put aside 25 to 30 percent of the money they have paid you, in it's own savings account from which you will not make a withdrawal until you file your income taxes a year from now

No! NO!
You want to call the IRS today, tell them taxes haven't been withheld, and find out how to set up an estimated payment for the April due date (or, if you haven't done your 2005 taxes yet, get the paperwork for it then).

Otherwise you won't just have to pay the taxes come next year, you'll also have to pay a penalty, which can, depending on what you're making and what you'll owe, be pretty hefty.

You need to talk to the IRS, not just to bust your shady boss, but to make sure you're not out a couple hundred dollars to them come 2007 in penalties because of this.

Sure, if you make $20,000 a year it won't be bad. But if you make $100,000? Ouch.
posted by Kellydamnit at 12:03 PM on March 22, 2006

More info on tax underpayment:
here or, straight from the IRS, here.

Don't wait a year, take care of this soon. The taxes may have been something you would have paid either way, but why tack another seven percent onto that if you can avoid it?
posted by Kellydamnit at 12:12 PM on March 22, 2006

Anon, I would only add that if you like your job, as you say, you should emphasize that with your boss. Having the withholding issues cleared up is non-negotiable, but if you like your job otherwise you should emphasize that to increase the chance of things working out well.
posted by alms at 12:50 PM on March 22, 2006

These sorts of fuck-ups and delays happen all the time in mid-size/large companies.

No, they do not. Yes, I've had direct deposit take some time and get messed up. That's not the big issue here. It's the taxes - Anon filled out the Withholding forms, but they aren't withholding the taxes. That is not something that any company bigger than a mom&pop grocery would have a problem with; it's so much a routine thing that it should be automatic. That they aren't doing it says something very wrong is happening.
posted by Kirth Gerson at 1:26 PM on March 22, 2006

I don't see why you would automatically assume the worst. All this speculation about tax evasion seems pretty unwarranted. These sorts of fuck-ups and delays happen all the time in mid-size/large companies. At another job, it took them about 6 months to set up direct deposit for me. In the end I had to schedule a meeting with the freaking CFO.

FYI, this is garbage. Listen to everyone telling you to bail.
posted by cellphone at 2:53 PM on March 22, 2006

Kirth, you're just speculating. Wildly so. There are literally thousands of reasons why a company would forget to withhold taxes. Forms get lost, are filled out incorrectly, misunderstandings happen, etc. The chilidish insistence that it's all Just As Bad As You Imagine is pretty baseless given anon's question. Anon's employer has been accused of everything from tax evasion to fraud. Really, it's ridiculous. One guy out of five went through fine. Handwritten checks are indeed shady, but they're not unheard of--it's actually what a company might do when it's payroll is messed up. Suggesting anon go to the authorities on such scant evidence is silly. I suspect anon's real question is--is this sort of thing totally uncommon? And the answer is no. Fuck ups happen, especially at the biggest and most respectable companies.
posted by nixerman at 10:20 PM on March 22, 2006

Join your union. Ask for help.
posted by robcorr at 12:10 AM on March 23, 2006

No, I am not speculating. I am relying on my 40+ years of experience working for a wide variety of companies in several different industries. I have never, ever, seen anything like this, nor have I heard of it (and my friends would certainly talk about it if it happened to them.) These people did not "forget" to take out taxes; Anon has reminded them more than once. Forms that get lost, are filled out wrong, or are misunderstood, all get corrected sooner rather than later.

This is totally uncommon. Or are you telling us it's happened to you? And the biggest companies are the most likely to have this particular procedure standardized so it is automatic.

I do not understand your motives in trying to make this look like a "misunderstanding". It isn't; it's a deliberate series of actions in pursuit of some unexplained but definitely abnormal end.
posted by Kirth Gerson at 4:51 AM on March 23, 2006

Kirth, this has never happened to me personally but I have heard of it happening once or twice before. That's why I don't think is such a big deal. If the company is having trouble putting these persons on the standard payroll then, yes, it's understandable that the company would pay them by check without taxes for now with the understanding that those taxes would be deducted later. I would be even more surprised if the company took out taxes and benefits "by hand" because those sorts of operations must be performed and rigorously audited by the payroll company's software base. So yes, this doesn't strike me as that unusual. What you, and also anon, don't understand is that a company can't "secretly" hire you as a 1099 unless you actually fill out a 1099. If anon filled out a W2 then that pretty much settles the question. Since they're paying him with checks and not cash (which would be very suspicious) suggestions of tax-evasion are just wrong. At this point, calling the authorities, when you have zero evidence of wrongdoing or even intent, would just be foolish. Having an incompetent payroll dept isn't a crime. Until the 90 days pass and anon is actually let go, there's nothing here that even hints of anything like what you're suggesting.
posted by nixerman at 7:33 AM on March 23, 2006

pay them by check without taxes for now with the understanding that those taxes would be deducted later.

Obviously, Anon is not party to that understanding, since he posted the question. When he's asked the payroll people about it, he has "gotten the brush-off."

Data point: I have worked jobs where I was paid by handwritten check, with the taxes taken out (and accounted for on an attached stub). The handwritten check part is not the problem. And the math required to figure the taxes is not arcane.

Data point: My first two jobs paid in cash, in little brown envelopes (with an enclosed statement of earnings and deductions). Nothing suspicious about it.

The employer's refusal to account for not doing the taxes is evidence of wrongdoing. The fact that no one has come forward here and said "Yeah, the tax thing happened to me, too, and here's how it came out" should tell you how off it is. it doesn't happen.

At this point, calling the authorities, when you have zero evidence of wrongdoing or even intent, would just be foolish.

Going to an *authority* to get definitive answers is foolish? How do you justify that?

I would like it if a tax lawyer would weigh in here. If the employer has no obligation to take out taxes from every paycheck, it would change the discussion.
posted by Kirth Gerson at 10:02 AM on March 23, 2006

All due respect nixerman, you don't know what you're talking about. I tried to write this more delicately in the course of the below missive, but you've made so many complete misstatements here that it's just not practical.

No employee fills out a W-2, they are issued to employees by employers at the end of a tax year. What you are apparently describing is a W-4 form but since there's no IRS requirement to file those forms with them it does nothing to settle the question. There are some submission requirements for resident aliens but for everyone else they just have to be on hand and available to show on demand. They even removed the requirement to fill potentially questionable W-4s last year - reasonable 0-9 deductions have never had to be filed.

Additionally, no employee fills out a 1099, they are issued one annually, either in place of or in addition to a W-2 depending on what kind of payments were made over the course of the year.

Most employers will file a 941 on a quarterly basis which will include employee SSNs and payments for withholding, however there's no requirements for them to tell employees about this and I would bet that not one person reading this has ever been informed by their employer about their quarterly withholding filings. Its just not something employees have to care about in normal circumstances.

Additionally, the above mentioned W-4 form may have been filled out to allow the employer to do withholding but since employees are almost never given copies of this form (since most don't care) most employees would be hard pressed to know they weren't just fed into the shredder if not for the withholding lines on their paychecks.

The link at the top includes mention of form SS-8 which anon can file if s/he can't get resolution on this from hir employer. From my reading a little more in other places in the IRS literature it appears unlikely s/he would under any circumstance be called upon to make good on the social security withholding and also unlikely s/he could be forced to pay penalties for not filing quarterlies on that withholding. However the existence of the form and the process makes it clear this isn't the amazingly rare non-issue you continue to make it out to me.
posted by phearlez at 11:25 AM on March 23, 2006

phearlez, thanks for correcting me. No need to even be delicate. It's more important that the truth to come out.

I have never, ever, seen anything like this, nor have I heard of it (and my friends would certainly talk about it if it happened to them.) These people did not "forget" to take out taxes; Anon has reminded them more than once.

It's never happened to me personally, yes, but I have heard similar stories. And, yes, as a manager who's often been involved with hiring and settling new employees I've seen the countless ways the process gets messed up. In these sorts of situations it's pointless to attribute to malice what is easily explained by incompetence. Which is more likely: (a) a respectable, mid-size company goes through great expense to hire five employees and then concocts a conspiracy involving everybody in the HR and payroll depts. so that the company can fire four of the employees after 90 days (b) somewhere along the line somebody screwed up royally and now, as a result, everybody's confused and nobody knows what's going on. In my own experience, (b) is far more likely than (a).

Forms that get lost, are filled out wrong, or are misunderstood, all get corrected sooner rather than later.

No, not really. These things generally don't take care of themselves. The three departments (anon, payroll and HR) end up blaming one another and the issue gets forgotten. That's why I recommended anon ask blunt, direct questions and insist on continual meetings and work with his co-employees. Generally these things don't take care of themselves; they require constant, direct action on her part.
posted by nixerman at 2:29 PM on March 23, 2006