What does the 'Excess Federal Tax Withheld' error on Form 1099/W-2 mean?

This error means that the federal income tax withheld for one or more employees is unusually high compared to the wages reported. The IRS/SSA requires additional verification before processing the return to ensure the withholding amount is accurate.

Why this matters

The IRS/SSA monitors unusually high withholding amounts to catch reporting errors and ensure correct payroll tax calculations. If not verified, your filing may be delayed or reviewed further.

Common causes

• Data entry errors – Extra digits, misplaced decimals, or incorrect entries.
   
• Misclassification of income – For example, bonuses or deferred comp entered as regular wages.
   
• Duplicate reporting – The same employee’s wages reported more than once across forms or uploads.
   

How to fix it

• Edit the form: Review and update wage or withholding details if incorrect.
                                                    or
• Upload supporting documents: If correct, provide proof to validate the reported amounts.
   

Acceptable proof includes:

• Pay Stub or Payment Report: The recipient’s pay stub or a payroll report showing that federal tax was withheld from the payment.
   
• Proof of Federal Tax Deposit: A copy of the EFTPS (Electronic Federal Tax Payment System) receipt, IRS acknowledgment, or any official confirmation showing that the withheld tax was deposited with the IRS.