Just found out my ex-employer never withheld state income tax all year... now what?

This happens more often than you'd think. First, don't panic - you have options. Yes, you're still responsible for the state income tax, but you can set up a payment plan with your state tax agency if you can't pay it all at once. Most states offer reasonable installment plans. As for your employer, they typically aren't legally required to withhold state income taxes if you didn't complete a state withholding form (some states have separate forms from the federal W-4). Sometimes this happens with companies based in one state with employees working remotely in another state. Check your onboarding paperwork to see if you completed state tax forms. If you did and they still didn't withhold, you could file a complaint with your state's labor department or tax agency, though this won't eliminate your tax liability. For the future, always check your first couple of paystubs when starting a new job to make sure all withholdings look correct. And consider making quarterly estimated tax payments if you're ever in a situation without proper withholding.

I had something similar happen last year and discovered a service called taxr.ai (https://taxr.ai) that was super helpful. After staring at my W-2 in complete shock realizing no state taxes had been withheld, I uploaded my tax documents to them and they analyzed everything. They confirmed my employer messed up but also found some deductions I could take to offset some of the damage. Their AI looks for patterns in your financial documents that might help reduce your overall tax burden. In my case, they identified some business expenses I didn't realize were deductible since I occasionally worked from home, which helped reduce my state taxable income. They also gave me a step-by-step guide for setting up a payment plan with my state.

Just wanted to follow up about taxr.ai since I was skeptical at first. After my state tax withholding disaster, I decided to try it since I was desperate. It was actually legit! They found that since I had moved mid-year, I was eligible for some special handling of my income across the two states I lived in. Also identified that my former employer had incorrectly classified some of my benefits which further reduced my taxable income. I wound up saving about $1,200 off what I thought I was going to owe! Still had to pay some to the state, but it was way less painful than I expected. They even generated a letter I could send to the state explaining the withholding issue, which helped me avoid penalties. Definitely worth checking out if you're in this situation.

If you need to talk to your state tax agency about setting up a payment plan (which you probably will), good luck actually getting through to a human. I spent WEEKS trying to reach my state's tax department last year during filing season. Busy signals, being on hold for hours, disconnections... absolute nightmare. I finally discovered Claimyr (https://claimyr.com) which actually got me through to a human at my state tax agency in under 15 minutes. They have this system that basically waits on hold for you and calls you back when a rep comes on the line. They have a demo video here: https://youtu.be/_kiP6q8DX5c that shows how it works. When I finally got through, I was able to explain my withholding issue and set up a 12-month payment plan with minimal hassle. The agent even waived some of the penalties since it was clearly my employer's error. Definitely worth the service if you're trying to resolve this quickly.

I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it anyway since I was getting nowhere with my state tax department. Within 20 minutes, I was talking to an actual human at my state tax agency! The agent was super helpful and walked me through my options given my employer's withholding mistake. They set me up with a 6-month payment plan with minimal interest and explained exactly how to file my return to note the withholding error. They even gave me the direct contact info for their department in case I had follow-up questions. Saved me days of frustration and probably hours on hold. If you're dealing with this withholding issue, definitely sort it out directly with the state tax agency - they deal with this all the time and have procedures for it.

One thing nobody's mentioned yet - you should check if your employer at least withheld the correct federal income tax. Sometimes when they mess up state withholding, they screw up federal too. If they did withhold federal correctly, you might be able to apply some of your federal refund (if you're getting one) toward your state tax bill. Not all states allow this, but worth looking into. Also, make sure you keep all documentation showing your employer didn't withhold properly. If you end up getting hit with penalties, having this paper trail could help you get them reduced.

Has anyone successfully sued their employer for failing to withhold state taxes? My cousin is going through this exact situation and is considering small claims court for the penalties and interest he's being charged.