Payroll Screw-up...need Advice

There are going to be a lot of people that tell you to keep the cash and make interest, but the smart move is to have it all taken out of your next check.

If you think you'll meet the safe harbor provisions I see no reason to pay it back.

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If your 2013 adjusted gross income was more than $150,000 ($75,000 if you are married filing a separate return), you must pay the smaller of 90% of your expected tax for 2014 or 110% of the tax shown on your 2013 return to avoid an estimated tax penalty.

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here are going to be a lot of people that tell you to keep the cash and make interest, but the smart move is to have it all taken out of your next check.

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Oh I think the interest consideration is virtually worthless.

I would just keep the cash in my hands. Just because I don't trust the government to give it back.

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In the end, you're going to come out pretty much even either way. Were it me, I'd take option 2 just so there are no surprises on next year's tax return.

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So you're saying there's more risk in keeping the money than giving it back? I doubt with either option that I'll be ahead, i mean it is the government. I just don't want any nasty surprises come 1Q when I do my taxes.

The company is trying to avoid you having to "pay" taxes on the trip, by basically providing additional money to you to cover the tax implications of the trip. This way, you don't have to pay the taxes out of your own pocket. That is what is meant when they said "the goal was to gross up..."

Do you normally get a refund, or do you normally owe taxes?

If you don't send the money in, your refund will be less, or, you may owe more than normal. If you end up owing more than $1,000, you *might* owe penalties and interest. Depends on your tax situation.

I would go with option 3. What is option 3? Look at your last paystub, figure out what the additional amount is that was paid to you, and sent it in as an estimated tax payment to both the IRS and whatever state you are in.

I say this because I would not necessairly trust the company to get it right with option 2, and option 1 *might* cause a headache down the road.

Just don't forget you made the estimated tax payment when you prep the tax returns next year.

Couldn't he face an underpayment penalty though if he waits until year end?

It'd be pretty hard to get hit with underpayment for something as small as this - see the first two items below, in particular.

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Generally, you will not have to pay a penalty for 2013 if any of the following apply.

The total of your withholding and timely estimated tax payments was at least as much as your 2012 tax. (See Special rules for certain individuals for higher income taxpayers and farmers and fishermen.)

The tax balance due on your 2013 return is no more than 10% of your total 2013 tax, and you paid all required estimated tax payments on time.

Your total tax for 2013 (defined later) minus your withholding is less than $1,000.

You did not have a tax liability for 2012.

You did not have any withholding taxes and your current year tax (less any household employment taxes) is less than $1,000.

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I typically get money from the government during taxes. Albeit, it's only $1500-$2000 but it's still something that I look forward to so I can spend it on my wife's lingerie. They paid us about $1700 which was supposed to go towards the tax, so i could break even at YE when tax time comes around. In that case, I would rather take the money now so i'm not paying $400 back each of the next 5 paychecks and rather break even in February.

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?...so I can spend it on my wife's lingerie.

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You brought it up, pics of her in it, or partially too.

"In it to win it"? You work for Cintas?

I'd have accounting deduct their version of your tax liability.