Dear Tax Talk:
My fiance got some bad information from a co-worker
at work. We have had it hard due to some medical
issues with me, and my fiance was talking to someone
at work and his friend advised that we should
file exempt on our W-4, so we did. He makes about
$79,000 a year, so we owe a substantial amount,
but we will be able to pay by the time taxes are
due because I am now able to work again.
We found out recently that we were misinformed, and it is illegal to do this. Now we are extremely worried about getting into
trouble. When I looked it up on the IRS Web site, it stated you can get imprisoned or fined. Anyone have any advice? Do they
only prosecute if you are a repeat offender?
I know it was our responsibility to keep up with tax laws, and we should have double-checked what we were told, but when we
talked to payroll they also stated he could do this. He works for the federal government, and I am sure they would frown upon
any criminal conviction whether we knew we were breaking the law or not.
Any help would be greatly appreciated;
we are really worried. Thank you. We would have
never done it if we knew it was illegal, so this
was the first time. Does the IRS look at your
prior tax history? We never did this before, which
we hope they will take into consideration.
While what you did may not be right, it is not
the kind of criminally wrong thing that the IRS
would go after you for. It used to be that an
employer would have to forward to the IRS W-4
forms that claimed exempt if the employee was
not a student. This forwarding requirement was
eliminated in 2005, probably because it was overwhelming
for the IRS and not a good use of their resources.
While the IRS no longer requires
Forms W-4 be forwarded to them, I'm sure they
look at folks that consistently have no tax withheld
from their payroll and don't otherwise pay the
balance due with their return. These folks are
most likely taking a frivolous position that the
tax laws do not apply to them. In other words,
they are tax protestors. Since you're planning
to pay what you owe and it is not a recurring
problem, the IRS most likely will not bother you.