When the IRS Does Not Properly Credit Federal Tax Withholding
Federal income tax withholding reported on Form W-2 generally represents amounts withheld from an employee's wages and applied toward the employee's federal income tax obligations. When those amounts are not properly credited to a taxpayer's account, the IRS may show an outstanding balance that does not accurately reflect the taxes already withheld.
Resolving this type of discrepancy may require taxpayers to provide documentation substantiating the withholding and work through the appropriate IRS administrative process to correct the account.
IRS Liability Resulting From Uncredited W-2 Withholding
Our client came to us facing a significant IRS liability after the IRS failed to properly credit federal income tax withholding reported on the client's W-2 wages.
The outstanding liability remained even though federal income tax had been withheld from the client's wages.
Challenging the Tax Liability Through a Collection Due Process Hearing
To challenge the outstanding liability, we represented the client through a Collection Due Process hearing and worked closely with the assigned IRS Appeals Officer.
Our team obtained supporting documentation from the client's employer and presented the evidence necessary to substantiate the federal income tax withholding that had not been properly credited.
IRS Tax Liability Reduced by Approximately $220,000
After reviewing the documentation, the IRS corrected the account and significantly reduced the amount owed.
Result: The client's outstanding tax liability was reduced by approximately $220,000.
Frequently Asked Questions
Taxpayers should review their IRS records and gather documentation showing the amount of federal income tax withheld. Depending on the circumstances, documentation from an employer may also be relevant when asking the IRS to correct the account.
A Collection Due Process hearing provides qualifying taxpayers an opportunity to have certain IRS collection matters reviewed by the IRS Independent Office of Appeals. The issues that may be raised depend on the taxpayer's circumstances and the procedural history of the case.
A Form W-2 is an important record of wages and federal income tax withholding. Depending on the dispute, additional payroll or employer documentation may also help substantiate amounts that were withheld.
An IRS account may be corrected when documentation establishes that the balance is inaccurate. The appropriate process depends on why the discrepancy occurred and where the matter stands procedurally.
Certain underlying tax liability issues may be raised during a Collection Due Process hearing, depending on the circumstances and whether the taxpayer previously had an opportunity to dispute the liability. Other collection-related issues may also be considered.
Resolve an IRS Tax Liability Caused by Withholding Errors
Errors involving federal income tax withholding can result in an IRS balance that may not accurately reflect what a taxpayer owes. Addressing these issues may require supporting documentation and communication with the IRS to establish the correct amount.
The Wilson Firm represents taxpayers in IRS collection matters, including disputes involving outstanding tax liabilities and Collection Due Process proceedings. Contact The Wilson Firm to discuss your tax matter and available options.
Why Hire Us?
At The Wilson Firm, we provide personalized, strategic representation tailored to each client's situation. Whether you're facing a government investigation, a tax dispute, or enforcement action, our attorneys work closely with you to understand the facts, assess the risks, and pursue the most favorable resolution possible. Based in The Woodlands and serving the Greater Houston area, The Wilson Firm can also represent businesses nationwide in federal IRS worker-classification and employment tax matters.
We understand that legal matters can be complex and overwhelming. Our role is to simplify that complexity—handling communications with tax authorities, developing a clear strategy, and guiding you through each step with confidence.
From high-stakes disputes to proactive planning, we are committed to protecting your interests and delivering practical, results-driven solutions.
Contact us today to learn how our experience and approach can help you move forward with clarity.
