Rule 22.
(1) If an
employer overwithholds income tax from an employee's wages, or if he withholds
Michigan tax where he should not have withheld Michigan tax, he may repay the
amount withheld in error to the employee at any time within the same calendar
year. He shall obtain a receipt from the employee for the amount refunded and
keep it as a part of his own records. The employer may adjust his records
internally and deduct the amount refunded from the tax owing on his next return
or he may ask for a cash refund.
(2) The fact that an employer is withholding
more on 1 basis than he would if he were using another method, for example, the
wage bracket method as compared to the percentage method, does not mean that
there has been an overcollection. The employer may choose whichever method he
prefers and if his computation is correct according to the method selected,
there is no overcollection. Similarly, if an employee does not file an
exemption certificate so that more is withheld than would have been if he had
claimed his exemptions, there is no overcollection on that account and no
repayments to him by the employer would be authorized.
(3) If the employer does not repay the
employee for the overcollection, the employee's remedy lies in claiming credit
for the amount withheld on an individual income tax return.
(a) Example 1. An employee was a resident of
Michigan and lived and worked in Michigan through June of the current year. On
July 1, his employer reassigned the employee to New York state. The employee
moved to and became a legal resident of New York state on July 1.
The employer correctly withheld $600.00 Michigan tax from
January through June, but erroneously withheld another $200.00 Michigan tax
instead of New York tax during July and August and paid Michigan $800.00 tax
which was withheld from this 1 employee.
The employer should refund $200.00 to the employee and obtain
a receipt for his records. The employer may either reduce his next Michigan
return by $200.00 or ask for a refund. The W-2 shall show $600.00 Michigan tax
withheld.
(b) Example 2. A
coding error resulted in Michigan tax being withheld from an employee who is a
resident of Minnesota. The employee never lived or worked in Michigan. The
employee found the error when he received his W-2. If the employer can recover
the W-2 and issue a corrected W-2 showing no Michigan tax withheld, he may
refund the tax to the employee, obtain a receipt, and either deduct it from the
amount withheld the following month or ask the department for a refund. If the
employer cannot recover the W-2 from the employee, the employee shall obtain
relief by filing a Michigan individual income tax return.
