Can employer claim/get Tax return money of employees??

[candyroy]

Sounds fishy

A clarification - the company is witholding taxes at source and paying taxes to the IRS just like any other US company. That's what the Tata group means by 'paying taxes'. They pay a regular US salary; withold taxes and pay an amount which is post tax. They are paying wages in the US and they pay all taxes an employer has to - FICA etc. There's a lot of confusion due to the terminology used by the company. The net net is that the company can keep the refund without commiting any tax fraud.

Might want to consult with a board certified accountant. By law employers of all non-independent contractors are required to withhold taxes from employee wages and send it to IRS/local tax offices. The amount withheld is FROM the EMPLOYEE'S EARNED wages a.k.a. salary a.k.a. money and as such are required by law to file taxes (depends on your gross earnings). What is been described sounds like someone is taking advantage of people who are not well versed in the tax laws or maybe there is now a new loop hole in the law that entitles employers to rip people off of their money. If something does not sound right then it worth looking into.

 

[candyroy]

Company policy

does not overide U.S. tax laws (Fed/state/local). Not sure of the laws in other countries

The point is Tata is not committing any tax fraud by keeping an individuals tax refund. This 'company policy' is very well documented.

 

[hipka]

Nothing fishy about it

Might want to consult with a board certified accountant. By law employers of all non-independent contractors are required to withhold taxes from employee wages and send it to IRS/local tax offices. The amount withheld is FROM the EMPLOYEE'S EARNED wages a.k.a. salary a.k.a. money and as such are required by law to file taxes (depends on your gross earnings). What is been described sounds like someone is taking advantage of people who are not well versed in the tax laws or maybe there is now a new loop hole in the law that entitles employers to rip people off of their money. If something does not sound right then it worth looking into.

Got this clarified from my friend in TCS. TCS sends its employees to the US on a net pay basis, i.e. they are guaranteed to get $x after taxes. Their paystubs however reflect $x+$y, where $y is the tax paid. Therefore if you look at the paystubs it appears that the company is paying them $x+$y when they were actually promised only $x. It would be illegal only if they paid less than $x or if they withheld taxes from $x which is not the case. Hence any refund of the taxes paid(i.e. $y) belongs to the company and they are trying to make sure they get the max. refund possible.
The reason this sounds funny is beacuse most companies in the US guarantee the gross pay, or pay before taxes. Therefore the refund belongs to the employee.ex. $z is promised and the paystubs show $z, but employee gets $z-$w. Hence the tax comes out of the employee money and refunds go to him.
Hope this clarifies this ignorant thread!!!

 

[qwertyisback]

Ya, TCS and other companies had done their homework very nicely, No question about it. They are following this business practise for years without any problems. Its just few pissed off TCS guys trying to raise non-issue as issue and doing timepass on forums

 

[oneguyfromindia]

but...

Got this clarified from my friend in TCS. TCS sends its employees to the US on a net pay basis, i.e. they are guaranteed to get $x after taxes. Their paystubs however reflect $x+$y, where $y is the tax paid. Therefore if you look at the paystubs it appears that the company is paying them $x+$y when they were actually promised only $x. It would be illegal only if they paid less than $x or if they withheld taxes from $x which is not the case. Hence any refund of the taxes paid(i.e. $y) belongs to the company and they are trying to make sure they get the max. refund possible.
The reason this sounds funny is beacuse most companies in the US guarantee the gross pay, or pay before taxes. Therefore the refund belongs to the employee.ex. $z is promised and the paystubs show $z, but employee gets $z-$w. Hence the tax comes out of the employee money and refunds go to him.
Hope this clarifies this ignorant thread!!!

that is fine so long as only the US income is considered..

but...in this case the employees are earning in INR (Rupees) also in India as a portion of their income. The companies add this income to the net pay in the US. The employee pays the tax in India (Double taxation) in spite of a no double taxation treaty between India and the US.

Net result:
the $x is promised

$x+$y is shown in the paystubs

$y includes the gross (untaxed) Indian earnings for which the employee has already paid tax in India out of her/his pocket.

US tax declaration includes the Indian earnings but not the taxes paid in India.

Refunds go to the company.

Employee gets screwed et al.

So if the company wants to claim any taxes- shouldn't it be paying the employee for the additional tax burden in India as well?

 

[harvydonald]

consider the following situation...

In situations where employee has a signed agreement with the employer that he/she will receive a certain amount a month (say $5000) regardless of the taxes and the company will bear the tax bill, then the company will pay the employee $5000 a month and pay the estimated tax every month. At the end of the year the company will file tax returns on behalf of the employee and collect whatever amount they paid extra....is that legal???

 

[schandrag]

This does not make sense
What if the employee owns a house and makes mortgage payments. The employee is supposed to receive tax deductions for the mortgage payments not the employer those mortgae payments are coming out of the employee's take home pay.

 

[hipka]

that is fine so long as only the US income is considered..

but...in this case the employees are earning in INR (Rupees) also in India as a portion of their income. The companies add this income to the net pay in the US. The employee pays the tax in India (Double taxation) in spite of a no double taxation treaty between India and the US.

Net result:
the $x is promised

$x+$y is shown in the paystubs

$y includes the gross (untaxed) Indian earnings for which the employee has already paid tax in India out of her/his pocket.

US tax declaration includes the Indian earnings but not the taxes paid in India.

Refunds go to the company.

Employee gets screwed et al.

So if the company wants to claim any taxes- shouldn't it be paying the employee for the additional tax burden in India as well?

No they don't need to pay indian taxes, because in India TCS hires like other companies and the taxes come out of the employees pay. So the employee will receive a net of $x(US pay) in US and Rs.Z = gross -taxes(from his pay) in india at the same time.
Tell me if this is not correct

 

[hipka]

consider the following situation...

In situations where employee has a signed agreement with the employer that he/she will receive a certain amount a month (say $5000) regardless of the taxes and the company will bear the tax bill, then the company will pay the employee $5000 a month and pay the estimated tax every month. At the end of the year the company will file tax returns on behalf of the employee and collect whatever amount they paid extra....is that legal???

It looks legal as long as the W2 represents the gross pay and not just 60K.