Can Employer Claim Tax Refund?

swprof

New Member
Hi

I would like to know if an employer can legally claim the employee's tax refund. I would like to explain the situation with an example below:

1. The employer - an Indian software outsourcing company files for the employee's H1-B visa.

2. The employer agrees to pay the employee $40,000 per year after taxes are deducted. A letter is given to this effect to the employee.

3. At the end of the year the employee's W-2 form shows an income of $60,000 of which $20,000 is withheld as taxes (Federal, State etc.).

4. Now when the employee files his return he gets a refund because of various reasons like (rent paid, child care etc ..)

5. The employer insists that the refund amount be returned to him (the employer) on the following grounds:

i) This makes the employee's income in excess of $40,000 which was the amount "agreed" upon initially. (E.g. if the employee gets a refund of $2000 his effective income is
$42,000 which is more than what the employer promised him).

ii) The employer's willingness to pay the balance taxes in case the employee has to pay taxes to the IRS. As a reciprocal gesture the employer expects the employee to return the amount if he gets a refund.

The interesting sidelight is that none of these are communicated to the employee when he leaves India to take up work in the United States.

Now my questions are:

a)Can the employer legally do this?

b)What is the legal status of the "understanding" between the employer and the employee about a salary of $40,000. My understanding is that the "salary" of an employee is the amount reported in his W-2, and any refunds come out of that salary are actually the employee's money.

This practice seems to be quite widespread among some of the Indian Software outsoursing firms.

Thank you so much for your help.

An Indian Software Professional
(I apologise for not disclosing my identity but I am afraid that I would lose my job the moment it becomes public)
(I apologise again if this is not the right forum - if anyone knows the right forum for this please help. Would appreciate it a lot)
 
Originally posted by swprof
Now my questions are:

a)Can the employer legally do this?

b)What is the legal status of the "understanding" between the employer and the employee about a salary of $40,000. My understanding is that the "salary" of an employee is the amount reported in his W-2, and any refunds come out of that salary are actually the employee's money.


a) No.

b) All the refunds based on your W2 are yours, employer can not claim on that amount.
 
This one takes the cake...

This is the first I'm hearing of such a situation.

Besides the fact that an employer only negotiates gross and not net (they have no business to, your net is determined by a number of factors which are legally confidential, and the employer has no right to know these, including deductions, certain exemptions, additional income over your paid salary, etc), how will your employer know your tax situation?

The employer is required to provide you with a W2 - it ends there. They cannot demand to see your actual 1040, and they certainly cannot lay claim to any of your refund.

Incidentally, rent for an apartment is not a deduction; only the interest in a morgtage for your residence is.

Tell your employer to go to hell, if they demand to see your 1040. There's nothing they can do about it.

K
 
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