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[someguyoutthere]

Jurisdiction/Place:

I'm in Michigan. My wife works for a company that's having big financial troubles. One of her co-workers said that someone on their board of directors said they've started tinkering with the paychecks.

Apparently, they're doing the usual withholding, but instead of paying taxes/Social Security with it, they're using that money for normal operating expenses.

When my wife and I talked about it, it became clear that we didn't know exactly what happens to that money when it gets withheld. Does it go directly to the government every pay cycle? Or do companies put that withheld money into an escrow account, to be paid to the government annually?

Presuming the tip is still accurate even with all the he said/she said, I can think of two possible situations.

a) The money is meant to go directly to the Fed/State every cycle, and every time they cut a check it's one more fraud.

b) It doesn't matter what they do with the money as long as it does indeed go to Uncle Sam at tax time, so while they may be incredibly reckless, it stops short of being actually criminal... until they can't pay the piper.

So, a bunch of questions. Is situation a) or b) the case--or something else? If the money is withheld but the government never gets it, are we personally liable? If she decides to be a tax whistleblower, will she face consequences from her employer (above and beyond simply working for a frighteningly shaky company)? Now that she has this knowledge (which she believes is credible even though it's third-hand) is she now implicated in the mess?

[cbg]

It's been a long time since I was responsible for this aspect of employment but if I recall correctly tax payments are made quarterly. As long as the payments are made, in full, on time, every quarter to the appropriate agencies the employer is legal.