Michigan Administrative Code
Department - Treasury
Customer Service Bureau
Income Tax
Section R. 206.22 - Overwithholding or withholding in error
Current through Vol. 24-04, March 15, 2024
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.
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.