Can an employer owe money for an employee’s income tax?

In the USA, can an employer be held liable for their employee’s federal income tax – specifically if the employer failed to inform employee of their responsibility to pay their own income taxes?

Let’s say an employer reports a worker to the IRS as a contractor (1099), but fools the worker into thinking they are a full-time (W-2) employee. Would there be a legal case to be had in holding the employer liable for that worker’s federal income tax?

1 Answer

Yes, an employer who improperly classifies a person to whom they pay compensation as a contractor can be found liable by the IRS for the “employer’s share” of FICA taxes (… as well as fines and other penalties: see IRS guidance).

But under current law the only way I can imagine an employer could be found liable to the employee for other taxes owed is through fraud or tort: E.g., the employer would have had to actively mislead or deceive the employee into believing it was withholding taxes or covering the employee’s tax liability when in fact it was not.

U.S. employers do not have a responsibility to educate employees or contractors about personal tax compliance.

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