Legal Question in Business Law in California

Re: Taxes withdrawn in 2008, not paid until 2009

You should discuss this in detail with an attorney as soon as possible (I provide free initial consultations, as many attorneys do, so feel free to contact me directly). My biggest concern is not you going to jail for the company's failure to pay the IRS the payroll taxes they deducted from your wages (unless you had a hand in that somehow). But rather, my biggest concern is that this company is in financial trouble and if you patiently wait you'll be paid ten cents on the dollar when the company goes into bankruptcy. Be one of the company's debtors who demands timely payment while the money is still there (or, at the very least, protect yourself better). I have several other concerns, including that you are entitled to interest and that you are undoubtedly damaged in other various ways from the company's wrongdoing and should consider pursuing compensation on those things too.

Re: Taxes withdrawn in 2008, not paid until 2009

It's not clear to me what the company is doing, or why. Do they use an outside payroll service, or prepare payroll and withholding internally? The latter arrangement is more likely to result in improper practices, especially when cash is tight.

If all you see is a paycheck, showing gross, deductions and net, how do you know what the employer is remitting to the IRS? Many employers when short of cash will delay remitting withheld tax money to the IRS and use it as working capital, but this practice is not going to get the employee in trouble.

Remember also that taxes are due and payable, both by the employer and the employee, on a "when paid" basis, not "when earned." This means that if you worked in December, 2008 but got your December, 2008 paycheck on January 2, 2009, that income would be reported by you on your 2009 tax return due 4/15/2010.

Also keep in mind that commissions are often treated as earned and payable not when the sale is made, but when the customer pays for the product.

I'd discuss this with the employer and the state labor commissioner's local office, a tax advisor, and perhaps an IRS taxpayer-inquiries person. Maybe they can sort out the issues here. I'd shun the auto deal, but don't worry about jail or the IRS as long as it is the employer, not you, that's misbehaving.