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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Employment Law
Satisfied Customers: 116727
Experience:  20+ Years of Employment Law Experience
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On my final pay, my former employer applied the 25%

Customer Question

On my final pay, my former employer applied the 25% supplemental tax rate to both the regular wages and the vacation payout. This is wrong, as the 25% can only be applied to the the vacation payout. Is my former employer legally required to refund me the amount I was overwithheld on the regular wages.
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: Yes, for the past 3 years, the regular withholding rate was applied to vacation payouts, and not the 25%. This year, there was at least one person who was not taxed at 25% on his vacation payout. Is my former employer required to do the same, because it was done for other employees? Or can it be applied to some people, and not others?
JA: OK. Got it. I'm sending you to a secure page on JustAnswer so you can place the $5 fully-refundable deposit now. While you're filling out that form, I'll tell the Accountant about your situation and then connect you two.
Submitted: 1 year ago.
Category: Employment Law
Expert:  LEV replied 1 year ago.

Your employer used 25% withholding rate to total payoff because that was a FINAL paycheck.

I assume that was a mistake made by the payroll person - and if so - you may ask to correct it.

However - otherwise - you are correct - withholding from regular wages - including the final paycheck should be according to W4 form.


On the other hand - that is withholding - not your actual tax liability - so when you will file your tax return - if your actual tax liability will be less than withheld amount - you will be claiming a refund - thus the money will be in your hands anyway.

But if larger withholding creates a financial hardship now - you definitely may communicate with your former employer and ask to correct that mistake.

Customer: replied 1 year ago.
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
Unfortunately, once your employer has taken the tax out, if they took out the incorrect tax amount, any refund must be filed for at the end of the year when you file your return. If you overpaid taxes, even by the employer taking out too much in taxes by mistake, then your proper recourse is collecting that back when you file your income tax return at the end of the year.
Once taxes are taken by an employer, that is the only way for them to be returned to you. Your employer cannot and will not be able to pay you the money back, contrary to what was insinuated above, because they paid it to the government already. So now you need to get it back when you file your taxes.