Sec. 174.3. Correcting mistakes

(a) Correcting mistakes in payments.

(1) Underpayments by employers. Where an employer has deducted and withheld the correct amount of New York State personal income tax from the employee but has made an underpayment of such withheld tax during a calendar quarter, and such employer discovers the underpayment prior to filing such employer's quarterly combined withholding and wage reporting return for the calendar quarter, such employer must correct the underpayment by making an additional payment with an additional New York State employer's return of tax withheld (form WT-1) during the calendar quarter. For interest on underpayments and additions to tax and civil penalties, see sections 684 and 685 of the Tax Law.

Example:

Employer A, in accordance with the provisions of section 674(a)(1) of the Tax Law and section 174.1(b)(1) of this Article, is remitting withheld New York State personal income tax after making a payroll in the first calendar quarter of a calendar year. On A' s New York State employer's return of tax withheld (form WT-1) A indicates an amount deducted and withheld of $800 and also indicates an amount remitted of $800. In actuality, A mistakenly submits a payment of $700. A discovers the error prior to the end of the calendar quarter, and should correct such error by submitting an additional employer's return of tax withheld on form WT-1 with a payment of $100 prior to the end of such calendar quarter. Interest will be charged and penalty may be imposed on the $100 underpayment from the due date of the original employer's return of tax withheld and payment to the date such $100 is paid.

(2) Overpayments by employers.

(i) Mistake discovered prior to filing quarterly combined return for the calendar quarter. Where an employer has deducted and withheld the correct amount of New York State personal income tax from the employee but has made an overpayment of such withheld tax and such employer discovers the overpayment prior to filing such employer's quarterly combined withholding and wage reporting return for the calendar quarter, such employer should make an adjustment by an offset in a subsequent New York State employer's return of tax withheld (form WT-1) being filed in the same calendar quarter. Where the employer does not correct the overpayment by offset, then the employer must show such overpayment on Part A of such quarterly combined return for such quarter and attach an explanation of the computation of the overpayment. Such employer may elect on such Part A of the quarterly combined return to have such overpayment refunded or credited to a subsequent quarter; provided, however, that a seasonal employer, referred to in section 174.2(a)(2) of this Part, may only have such overpayment refunded.

(ii) Mistake discovered in a subsequent calendar quarter. Where an employer has deducted and withheld the correct amount of New York State personal income tax from the employee but has made an overpayment of such withheld tax and such employer discovers the overpayment prior to filing such employer's last quarterly combined withholding and wage reporting return for the same calendar year, such employer must file an amended quarterly combined withholding and wage reporting return for the quarter in which the overpayment occurred and attach thereto an explanation of the computation of the overpayment. Such overpayment may only be refunded; the employer may not elect to credit such overpayment to a subsequent quarter.

(b) Correcting mistakes in withholding from the employee.

(1) Undercollections.

(i) General. Where less than the correct amount of New York State personal income tax is deducted from any wage payment to an employee, the employer is authorized to deduct the amount of the undercollection from later wage payments to the employee in the same calendar year. However, the employer is liable for any underpayment of withheld New York State personal income tax. Reimbursement by the employee is a matter for settlement between the employer and the employee. Where the employee does not reimburse the employer, and the employee pays any tax due with such employees New York State personal income tax return for the applicable calendar year, then see section 676 of the Tax Law and Part 176 of this Article.

(ii) Undercollection discovered prior to filing quarterly combined return for the calendar quarter. Where less than the correct amount of New York State personal income tax has been deducted from the employee's wages and the employer discovers the undercollection prior to filing such employer's quarterly combined withholding and wage reporting return for the calendar quarter, such employer must correct the underpayment to the Department of Taxation and Finance by making an additional payment with an additional New York State employer's return of tax withheld (form WT-1) prior to the end of the quarter. For interest on underpayments and additions to tax and civil penalties, see sections 684 and 685 of the Tax Law.

Example:

Employer B, in accordance with the provisions of section 674(a)(1) of the Tax Law and section 174.1(b)(1) of this Article, is remitting withheld New York State personal income tax after making a payroll in the second calendar quarter of a calendar year. On B's New York State employer's return of tax withheld (form WT-1) B indicates an amount deducted and withheld of $800 and also remits $800. In actuality, B was required to deduct and withhold $900 of New York State personal income tax. B discovers the error prior to filing B's quarterly combined withholding and wage reporting return for the calendar quarter and should correct such error by submitting an additional employer's return of tax withheld on form WT-1 and a payment of $100 prior to the end of the quarter. Interest will be charged and penalty may be imposed on the $100 underpayment from the due date of the original employer's return of tax withheld and payment to the date such $100 is paid. Reimbursement by B's employees is a matter for settlement between B and such employees.

(iii) Undercollection discovered in subsequent calendar quarter of calendar year. Where less than the correct amount of New York State personal income tax has been deducted from an employee's wages and the employer discovered the undercollection prior to filing such employer's last quarterly combined withholding and wage reporting return for the same calendar year, such employer must correct the underpayment of withheld New York State personal income tax by paying the amount of the underpayment to the Department of Taxation and Finance with an amended quarterly combined withholding and wage reporting return for the quarter in which the underpayment occurred. For interest on underpayments and additions to tax and civil penalties, see sections 684 and 685 of the Tax Law.

(2) Overcollections.

(i) General. Where more than the correct amount of New York State personal income tax is deducted from any wage payment to an employee, the amount of the overcollection should be repaid to the employee in the same calendar year in which the overcollection occurred. Where an overcollection is repaid to an employee, the employer must obtain and keep as part of such employer's records (and make available for inspection by the Department of Taxation and Finance upon request) a written receipt from the employee showing the date and amount of the repayment. Any overcollection not repaid to the employee and not receipted by the employee within the same calendar year must be reported and paid to the Department of Taxation and Finance with the New York State employer's return of tax withheld (form WT-1) and/or Part A of the quarterly combined withholding and wage reporting return in accordance with subparagraphs (ii) and (iii) of this paragraph.

(ii) Overcollection discovered prior to filing quarterly combined return for the calendar quarter. Where more than the correct amount of New York State personal income tax has been deducted from an employee's wages and the employer discovers the overcollection prior to filing the employer's quarterly combined withholding and wage reporting return for the calendar quarter, such employer must correct the overpayment to the Department of Taxation and Finance by entering the correct amount of the withholding tax liability on Part A of such quarterly combined return. The employer must attach to such Part A of the quarterly combined return an explanation of the computation of the overpayment and must also indicate whether or not such employer has repaid the overcollection to the employee. Where an employer shows an overpayment described in this subparagraph on Part A of the quarterly combined withholding and wage reporting return for such quarter and has repaid the overcollection to the employee, such employer may elect thereon to have such overpayment refunded or credited to a subsequent quarter; provided, however, that a seasonal employer, referred to in section 174.2(a)(2) of this Part, may only have such overpayment refunded.

(iii) Overcollection discovered in subsequent calendar quarter. Where more than the correct amount of New York State personal income tax has been deducted from an employee's wages and the employer discovers the overcollection after the filing of the quarterly combined withholding and wage reporting return for the calendar quarter in which the overcollection occurred, but prior to filing such employer's last quarterly combined withholding and wage reporting return for the same calendar year, such employer must correct the overpayment to the Department of Taxation and Finance by entering the correct amount of the withholding tax liability on an amended quarterly combined withholding and wage reporting return. The employer must attach to such amended quarterly combined return an explanation of the computation of the overpayment and must also indicate whether or not such employer has repaid the overcollection to the employee. Where an employer shows an overpayment described in this subparagraph on the amended quarterly combined withholding and wage reporting return and has repaid the overcollection to the employee, such overpayment may only be refunded; the employer may not elect to credit the overpayment to a subsequent calendar quarter.

Example:

Employer C, in accordance with the provisions of section 674(a)(1) of the Tax Law and section 174.1(b)(1) of this Article, is remitting withheld New York State personal income tax after making a payroll in the third calendar quarter of a calendar year. On C's New York State employer's return of tax withheld (form WT-1), C indicates an amount deducted and withheld of $800 and also remits $800. In actuality, C was required to deduct and withhold $700 of New York State personal income tax. C discovers the error prior to filing C's last quarterly combined withholding and wage reporting return for such calendar year but after C has distributed forms IT-2102 to C's employees. C repays the $100 overcollection to C's employees. C must correct C's reported withholding tax liability for the third calendar quarter by filing an amended quarterly combined withholding and wage reporting return and attaching thereto an explanation of the computation of the overpayment and also indicating the C repaid the amount of the overcollection to C's employees. C is entitled to a $100 refund of the overpayment. C must also amend the forms IT-2102 issued to C's employees to reflect the $700 amount of actual withholding tax liability (see section 172.1 of this Article).

(c) Any reference in this section to an amended quarterly combined withholding and wage reporting return shall also include reference to an amended quarterly combined withholding and wage reporting EZ return, where applicable.

(d) Where any of the mistakes referred to in this section are not corrected after all of the quarterly combined withholding and wage reporting returns are filed for the calendar year, such mistakes should be corrected when the employee files such employee's New York State personal income tax return for such calendar year and pays any tax due with such return. However, the employer may still be liable for any applicable interest, penalties or additions to tax.