[eszed]

As far as I know, there's no legal requirement for anyone to have their company deduct taxes / SS from their paychecks. I mean, we all do it, because it's more convenient than to have to track it for yourself (and also keep enough money on-hand to settle up with the government at the end of the year).

The standard thing to do would be to fill out a form, in order to have a deduction rate changed, and then another to have it changed back. It sounds like the form anyone else would have filled out would have gone to her, and then she'd have made the change in the payroll system. If she didn't fill out the forms, then what she did was irregular (and maybe worthy of some kind of discipline), but if she was smart enough that she did file the proper forms before she changed her own settings, then I can't see them making a disciplinary charge stick.

Even apart from that, so long as she paid the correct amount of taxes at the end of the year, she's not in any legal jeopardy. She didn't steal anything from anyone. I'm kind of cross with TFA for not explaining that clearly.

Obviously, yeah. Someone screwed up, badly, to have kept her on leave and on the payroll all this time, but that's not her responsibility.

[chipsa]

According to IRS Pub 15[0], I think companies are legally required to deduct the employer share of taxes. This doesn't apply to self-employed contractors because they're technically self-employed (so the employee and employer are the same). The W-4 can change your deduction rate, but only for the income tax portion, not SS/Medicare.

0: https://www.irs.gov/publications/p15

[eszed]

Yep. You're right, and I should have been more clear about that. There is nothing in the story, however, to suggest that this woman changed anything other than her employee-end deductions - and if she had, I'd expect there to have been a fairly-prompt criminal prosecution, rather than a drawn-out administrative "investigation".

Many years ago I worked for a restaurant whose owner was playing games with those employer-side deductions, trying (I believe) to stay solvent long enough to make it to the summer, and then pay off the back-due amount out of (expected) seasonal revenue. He almost made it, too. On June 15, however, I showed up to work to find the doors padlocked, with scary signs on them from some federal agency. The owner ended up having to sell his house and hold a yard-sale (seriously) to pay them off and avoid being prosecuted.

Everyone who worked there knew the state the business was in. For months I'd fully-expected not to receive my final paycheck, but the tips were good enough that I stuck around. Credit where due, the owner was honorable enough to send me, and the rest of the staff, personal checks to cover our final wages. I'd work for him again.

[chipsa]

> altering her Social Security/Medicare FICA deductions in order to increase her biweekly take-home pay by a few hundred dollars.

There are no employee-end deductions you can change here. The W-4 only allows income tax deduction, not SS/Medicare. But the responsibility for ensuring it's done is on the employer, and they're responsible for ensuring the right amount, to a certain level of fidelity is withheld. And the amount she changed the total withholding is likely not enough to have triggered any IRS look into the details, and therefore criminal charges. Your restaurant owner likely was doing games enough to materially change the value withheld, which gets the IRS interested.