How to Fix Withholding Errors

Many people find dealing with the IRS to be impossibly stressful, but correcting a withholding mistake is relatively simple fix.

Here, we'll outline the types of withholding errors as well as discuss the steps to correct them.

How Do Withholding Errors Happen?

Withholdings, the amount you set aside in tax for each paycheck, is handled by the employer and based on IRS calculations. Still, employers rely on the information their employees provide in their W-4 to come up with the percentages. That's because the W-4 form includes information about the employee's filing status, dependents, and other factors that affect how much tax is owed.

If W-4 information is incorrect, the amount an employer decides to withhold for that employee could be as well. Withholding errors fall into two categories: over-withholding or under-withholding.

Over-withholding means paychecks are setting aside more than the employee need for annual taxes.

Under-withholding means an insufficient amount is taken from each paycheck

How Do I Correct Withholding Errors?

If a W-4 error is caught after filing taxes that year, we advise consulting with your CPA to determine if you need to refile. If the amount under/over withheld is deemed too excessive, the IRS can send a lock-in letter notifying the employer how to adjust withholding regardless of the employee's W4 requests.

If a W-4 error is caught before filing, individuals can correct this relatively easily by refiling a W-4 with their employer. This can be found and downloaded from the IRS website.

When filling out the W-4, you have the option to withhold more than the amount your employer calculates. In the 2023 form, this is done online 4c. People will do this to either avoid paying a large chunk during tax season or to receive a larger return, depending on your taxes owed. To see how your withholding amount affects your refund, take-home pay, or tax due, use the IRS's estimator tool.

If you make a tax mistake, it's important not to panic. Errors are human nature, and as long as the inaccuracies were not an attempt at deceit, there is no reason to believe that you will face damaging consequences.

Of course, the easiest way to minimize the opportunity for error is to use Tax Pay & File from Future Systems. Over 99% of our payroll clients use this service, which costs less than an average IRS penalty. Contact us today to learn more!