Mich. Admin. Code R 206.22 — Overwithholding or withholding in error

Rule 22. (1) If an employer overwithholds in come tax from an employee's wages,
or if he withholds Michigan tax where he shoul d not have withheld Michigan tax, he
may repay the amount withheld in error to the employee at any time within the same
calendar year. He shall obtain a receipt from the employee for the amount refunded and
keep it as a part of his own records. The employer may adjust his records internally and
deduct the amount refunded from the tax owin g on his next return or he may ask for
a cash refund.
(2) The fact that an employer is withholding more on 1 basis than he would if he
were using another method, for example, the wage bracket method as compared to
the percentage method, does not mean that there has been an overcollection. The
employer may choose whichever method he prefers and if his computation is
correct according to the method selected, there is no ove rcollection. Similarly, if an
employee does not file an exemption certificate so that more is withheld than would
have been if he had claimed his exemptions, th ere is no overcollection on that account
and no repayments to him by the employer would be authorized.
(3) If the employer does not repay the employee for the overcollection, the
employee's remedy lies in claiming credit for the amount withheld on an individual
income tax return.
(a) Example 1. An employee was a resident of Michigan and lived and worked
in Michigan through June of the current year. On July 1, his employer reassigned
the employee to New York state. The employee moved to and became a legal resident
of New York state on July 1.
The employer correctly withheld $600.00 Michigan tax from January through
June, but erroneously withheld another $200.00 Michigan tax instead of New York
tax during July and August and paid Mi chigan $800.00 tax which was withheld from
this 1 employee.
The employer should refund $200.00 to the employee and obtain a receipt for his
records. The employer may either reduce his next Michigan return by $200.00 or ask for
a refund. The W-2 shall show $600.00 Michigan tax withheld.
(b) Example 2. A coding error resulted in Michigan tax being withheld from an
employee who is a resident of Minnesota. The employee never lived or worked in
Michigan. The employee found the error when he received his W-2. If the employer
can recover the W-2 and issue a corrected W-2 showing no Michigan tax withheld, he
may refund the tax to the employee, obtai n a receipt, and either deduct it from the
amount withheld the following month or ask th e department for a refund. If the employer

cannot recover the W-2 from the employee, the employee shall obtain relief by filing
a Michigan individual income tax return.