What to Do If Your Employer Didn’t Withhold CA OASDI Taxes

California employers must withhold payroll taxes, including OASDI (Old Age, Survivors, and Disability Insurance), part of Social Security. If these taxes weren’t deducted from your paycheck, you could face unexpected tax liabilities or complications when filing your return. Addressing the issue promptly helps avoid penalties and ensures proper contributions to your Social Security benefits.

Coverage and Eligibility

Not all wages are subject to OASDI withholding, so the first step is determining whether your earnings should have been included. The Social Security Administration (SSA) sets an annual wage limit for OASDI contributions. In 2024, the wage base is $168,600, meaning earnings beyond this amount are not subject to withholding. If your employer didn’t deduct these taxes, check whether your income exceeded this cap to determine if an error occurred.

Certain types of employment are exempt from OASDI withholding. Government employees with qualifying pension plans, some nonresident aliens, and members of specific religious groups may not be required to contribute. Independent contractors don’t have OASDI taxes withheld, as they pay self-employment taxes instead. If you were misclassified as an independent contractor instead of an employee, this could explain the missing deductions. The IRS determines classification based on factors like work control and financial arrangements. Misclassification affects not only OASDI withholding but also other tax obligations.

Some small businesses and family-run operations qualify for exemptions. For example, wages paid to a child under 18 working for a parent’s sole proprietorship are not subject to Social Security tax. Election workers earning below $2,200 in 2024 are also exempt. Reviewing these exceptions helps determine whether the lack of withholding was a mistake or a legitimate exemption.

Withholding Elements

Employers must accurately deduct and remit payroll taxes, including OASDI, to comply with federal and state requirements. The OASDI tax rate in 2024 is 6.2% of taxable wages, with employers matching this amount. Missing deductions could indicate a payroll error, misinterpretation of tax laws, or failure to properly register with tax agencies.

Many businesses use third-party payroll providers for tax calculations and deposits. If an employer relies on outdated tax tables or incorrectly configures payroll software, it can result in under-withholding. The IRS and California Employment Development Department (EDD) require timely deposits, which vary based on tax liability. Larger employers typically follow a semi-weekly deposit schedule, while smaller businesses remit taxes monthly. If OASDI wasn’t withheld, other payroll taxes may also be missing, leading to broader compliance issues.

Employees should review their pay stubs and W-2 forms for inconsistencies. A missing or incorrect Social Security deduction may indicate misclassified wages or payroll errors. Employers report wages and taxes on Form 941 (Employer’s Quarterly Federal Tax Return) and reconcile them annually on Form W-2. If an error is found, the employer may need to file a correction using Form W-2c and amend prior tax filings. Employees can also check their Social Security earnings record through the SSA’s online portal to ensure their contributions are properly credited.

Mistakes in Filing or Payments

Errors in payroll tax withholding can create complications for both employees and employers, particularly when tax reporting discrepancies arise. If OASDI taxes weren’t deducted, the issue often becomes apparent when employees receive their W-2 forms. Employers must report accurate wage and tax information to the Social Security Administration (SSA) and the Internal Revenue Service (IRS), and failure to do so can result in penalties.

One common mistake occurs when employers misreport taxable wages on quarterly tax filings, such as IRS Form 941. If an employer underreports payroll taxes and later corrects the mistake, they may need to submit an amended return using Form 941-X. The IRS imposes deadlines for adjustments, and delays can result in penalties ranging from 2% to 15% of the unpaid amount, depending on how late the deposit is made.

Incorrect payroll tax filings may also trigger compliance actions from the California Employment Development Department (EDD), which administers state payroll taxes, including State Disability Insurance (SDI). Federal tax discrepancies may prompt a state audit. If an employer consistently misreports wages or fails to withhold taxes properly, they may face additional fines and interest charges. Employees may also have issues filing their tax returns if their reported earnings don’t match IRS records, potentially delaying refunds or triggering audits.

Refund and Adjustment Procedures

If an employer fails to withhold OASDI taxes, the correction process depends on when the mistake is discovered. If identified within the same tax year, employers can adjust payroll records and make necessary tax deposits without employee involvement. If the issue is found after year-end reporting, corrections become more complex and require formal amendments.

Employees who notice missing OASDI withholdings on their W-2 should first request a corrected W-2c from their employer. If the employer refuses or is unable to fix the mistake, employees can report the issue to the IRS using Form 8919, which calculates the employee’s share of uncollected Social Security and Medicare taxes. Filing this form ensures Social Security earnings are credited correctly, preventing gaps in future benefits. Additionally, if an employer withheld taxes but didn’t remit them, employees may need to file Form 843 to request a refund.

Resources for Further Questions

Resolving payroll tax discrepancies can be complicated. Employees needing additional guidance should contact the appropriate government agencies or consult a tax professional.

The IRS provides resources for payroll tax errors, including Publication 15 (Employer’s Tax Guide), which outlines employer responsibilities for withholding Social Security taxes. Employees can also contact the IRS at 1-800-829-1040 to report withholding issues or seek assistance in filing Form 8919. The Social Security Administration (SSA) offers an online portal where individuals can verify their earnings records and request corrections if discrepancies are found.

For state-specific concerns, the California Employment Development Department (EDD) oversees payroll tax compliance and can assist employees in determining whether their employer met state tax obligations. The EDD’s website provides information on employer responsibilities, and employees can file complaints if they suspect tax misclassification or withholding errors. If an employer refuses to correct a mistake, employees may also seek help from the U.S. Department of Labor’s Wage and Hour Division, which enforces federal labor laws related to payroll practices. Consulting with a certified public accountant (CPA) or tax attorney can also help employees navigate complex tax issues and determine the best course of action for resolving uncollected OASDI taxes.