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Incorrect State Withholding Tax

One of our employees lives and works in MN. But we incorrectly set up the employee’s work tax area as KS as the employee’s manager works in KS office and we assumed the employee will be working in KS office. Employee never looked at pay check in 2017 nor did the employee look at her W2 in Jan 2018. She contacted us today asking us to issue a W2C ; reimburse her tax expense incase MN taxes is higher and she owes more money to MN.

I did my research and told her that she needs to file a non resident form with KS to zero out the taxable wages and taxes in KS and apply that credit to MN when KS refunds the money.

Do I still have to issue her a W2C and correct our 941s for 2017?


  • Not sure. I have not worked much with either state. I will say if the employer is responsible for the mistake, I fix it, whether I am legally required or not. Past that, you are under deposited in MN and over deposited in KS should you go the correction route.

    At the risk of stating the obvious, all new hires need to have their information double check by someone other then the person who did the date entry for this and other reasons. You check your parachute BEFORE you jump out of the plane. Choices are greatly reduced once you leave the plane.

    I used to routinely issue a quarterly email to ALL employees telling them to check their pay stubs for withholding and state status, and that if they choose not to, the results are on them. The wording was a bit more diplomatic, but that was the jist.

  • If the error is on our side will will make the change. If the employee did not file the proper forms, or lets say they changed their address and didn't advise, we may not make the change. we may file a w2c removing the wages but leave the tax, we will also adjust the wages on the correct state (if needed). This way they will file a return with no wages and should get a refund from the incorrect state. We do not make an additional tax deposit to the corrected state (this will result in penalties to the employer), we make it the responsibility of the employee to work with the state for their error.
    Also keep in mind you may have a SUI reporting issue. Did you report pay to the work state?

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