Q. A new employee was mistakenly paid through Accounts Payable for January, so no federal or state taxes were withheld from his pay. It’s still early in the year, so we’d like to take out the taxes that should have been withheld from later wage payments. But we don’t want to leave him with no net pay. According to our calculations, it should take us two months to withhold the additional taxes. Is this OK?
A. According to the IRS’ Circular E, if less than the proper amounts of federal income and FICA taxes are withheld from an employee’s pay, you can make up the underwithholding from later payments.
Once you get this employee’s taxes straightened out, you should determine how this mistake was made, so it can be avoided in the future.