IRS tells some employees to file amended tax returns after miscalculation on overtime wages
The IRS is telling some of its employees, within the ultimate weeks of the submitting season, that their wages had been miscalculated on tax varieties, and that they might want to submit corrected tax returns.
The errors concern the non-taxable portion of overtime wages. The One, Big Beautiful Bill Act that was signed into regulation final yr eliminated taxes on overtime from 2025 to 2028. Individual taxpayers can deduct up to $12,500 in overtime wages from taxable revenue, and joint filers can deduct up to $25.00o.
In an electronic mail despatched this week, the IRS informed some employees that the National Finance Center, a governmentwide payroll supplier primarily based within the Agriculture Department, “determined that overtime earnings were miscalculated and underreported” on their tax varieties.
“We are writing to inform you of an issue identified with the Form W-2 previously issued by the National Finance Center for the most recent tax year. If you are receiving this message, you have been impacted and will need to take action,” the e-mail states.
Impacted employees have obtained corrected W-2 varieties with the right amount of taxable overtime earnings. The IRS is telling employees to submit an amended tax return with the right amount of overtime earnings “if it changes the amount of your total tax.”
“For most employees, this correction does not change taxable wages or withholding; however, you should review your individual form carefully,” the IRS informed impacted employees.
With the tax submitting window closing on April 15, the IRS acknowledged that “many employees may have already filed their returns.”
An IRS spokesperson declined to remark.
Some IRS employees expressed concern over the discover, as a result of remaining in good standing with their tax obligations is a requirement for his or her jobs. The Office of Government Ethics requires all federal employees to “satisfy in good faith their obligations as citizens, including all just financial obligations, especially those such as federal, state or local taxes that are imposed by law.”
Shannon Ellis, president of the National Treasury Employees Union Chapter 66, which represents IRS employees in Kansas City, mentioned in an electronic mail that this error “could lead to discipline and/or removal.”
“The other fear is if some employees are not aware of the error yet,” Ellis mentioned.
The IRS is advising impacted employees to notify their managers about this concern and to retain a duplicate of their discover, in case they’re flagged by the company’s Employee Tax Compliance Program.
If the IRS imposed a penalty on employees who inadvertently filed an inaccurate tax return, the company has suggested employees to name and request the penalty be waived, “noting the IRS error in originally issuing an incorrect W-2.”
“Employees who may be affected by this correction should file an amended return, even if they are unable to pay any additional tax owed,” the company wrote.
The IRS misplaced greater than 1 / 4 of its employees up to now beneath the Trump administration, and fell in need of its hiring targets for the submitting season. Ellis mentioned contactors employed by the IRS can’t sustain with the workload, “and have sent much of it back to the IRS.”
“This has created an issue with timeframes and now employees are being forced to work 30 hours or more overtime every week until we correct the contractors’ errors,” she mentioned.
An IRS worker who obtained this discover informed Federal News Network that coworkers are involved about having to pay further charges to tax preparers to file corrected returns.
“This is a real issue for employees who really need to be sure they are in compliance when filing their returns, or they could lose their jobs,” the worker mentioned.
The IRS worker, who requested anonymity for worry of retaliation, mentioned the IRS has been operating on “extensive mandatory overtime.”
A second IRS worker who this would be the first time in his practically 40-year profession that he’s submitting an amended tax return.
“My main concern is that underreporting will later cause issues for employees, as we need to be in compliance,” a 3rd IRS worker mentioned.
A fourth IRS worker mentioned errors like this had been certain to occur. The company misplaced greater than 25% of its employees, however confronted a busier-than-usual filing season beneath the One, Big Beautiful Bill Act and had to replace dozens of federal tax varieties to mirror adjustments made beneath the laws.
“When you hound tons of human capital office employees out of the service… get people to do much more with so much less, how can it be any shock that the first implementation of a newly assigned formula for what portion of OT pay would be taxable would go awry?” the fourth worker mentioned.
The electronic mail states that the IRS is “currently evaluating options to minimize burden on affected employees.”
The IRS informed employees that Volunteer Income Tax Assistance (VITA) websites situated in a lot of its giant places of work will probably be accessible to assist impacted employees put together and electronically amended file returns, if wanted.
The IRS wrote that managers are inspired to “provide reasonable time for impacted employees to access VITA services during duty hours.”
This will not be the primary time this yr that the IRS has notified employees about potential submitting errors. In a Jan. 28 discover, the IRS informed employees that the incorrect pay interval was established as the primary pay interval of calendar yr 2026 for W-2 functions.
“As a outcome, some calendar-based deductions, for instance, Social Security and Thrift Savings Plan, processed incorrectly. This led to inaccuracies within the [year-to-date] totals displayed,” the IRS wrote.
The IRS informed employees that USDA’s National Finance Center fastened these errors, however inspired employees to assessment their earnings and go away statements.
IRS Chief Executive Officer Frank Bisignano told the House Ways and Means Committee earlier this month that the submitting season “has gone smoothly so far.”
“We’re 40% through the tax season, and we hear in every corner that it’s going well,” Bisignano mentioned in the course of the March 4 listening to.
Sen. Elizabeth Warren (D-Mass.), a member of the Senate Finance Committee, and Sen. Angus King (I-Maine) led 15 different senators in a Dec. 21 letter elevating considerations in regards to the IRS’ readiness for the submitting season.
“We write with serious concerns that the Internal Revenue Service (IRS) is not prepared for the upcoming tax filing season and that American taxpayers may face delays and difficulties in filing their tax returns and receiving their tax refunds,” the senators wrote.
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