Why am I seeing an ‘Excess Federal Income Tax Withheld’ warning on my form?

Last modified 6/2/2025 8:42:46 AM EST

This error appears when the federal income tax withheld for a recipient exceeds 24% of the total compensation or wages reported. The IRS flags this as unusual because it's uncommon for such a high percentage of income to be withheld, especially for contractors or employees

 

What could cause this error?

• Typing errors – A misplaced digit or decimal in either the compensation or withholding field
   
• Misinterpretation of withholding amounts – Reporting what was expected to be withheld rather than what was actually deposited
   
• Duplicate or misreported payments – Entering multiple payments incorrectly or combining them without adjusting tax amounts
   

How to resolve it:

To proceed with your filing, you can:

• Update the form:  If the withholding amount was entered incorrectly, correct the value to reflect actual deposits.

OR

• Upload supporting documentation: If the withholding amount is accurate, submit documents that verify your authority to report the values as filed.
   

Acceptable documents

• A copy of the accepted Form 941 showing the reported withholding for the applicable period

• IRS CP575 notice for the business

• Proof of federal tax deposits made to the IRS

• Proof of business registration with the state

• Accepted Form 945 for the business