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IRS Withholding Order – Withholding Compliance Program

Sometimes the IRS will send a withholding order to a taxpayers employer. This withholding order generally will lock in the taxpayer into the highest withholding possible. A withholding order is sometimes referred to as a lock in letter. Internal Revenue Code Section 3402 generally requires employers to withhold the proper amount of taxes from their employees’ compensation. Consequently, this ensure that the withheld taxes can be paid to the Internal Revenue Service (IRS) throughout the year.

Employees are required to provide employers a Form W-4, Employees Withholding Allowance Certificate. The W-4 identifies the withholding exemptions they plan to claim. The employer uses the completed Form W-4 to determine the amount to withhold for taxes from the employees’ pay. An employer must honor a valid withholding certificate furnished by an employee until the IRS provides the employer with written notice to disregard it (a lock-in letter). Furthermore, the IRS may issue such a notice after it determines that an employee’s withholding claim is unjustified based on IRS records.

Can I modify an IRS withholding order (AKA a lock in letter)?

Taxpayers may call in or send the Service additional information and request that we reconsider our proposed or previous lock-in determination. Faxed documentation is acceptable to process additional information requested. If the taxpayer faxes in an unfiled return send for processing. Moreover, if the taxpayer calls the IRS, the IRS will complete the WHC Withholding Estimator while the taxpayer is on the telephone to determine if a modified/lower withholding is justified. The IRS considers oral testimony of the taxpayer’s situation as acceptable. If you inform the IRS that you have furnished a new Form W-4 to your employer, the IRS will consider that a modification request.

Will the IRS release an IRS withholding order (Lock in order)?

When you contact the IRS, the IRS will offer to release of lock-in to those taxpayers who are tax compliant with all filing and payment requirements for the three tax years ending with the most recent return due. For withholding compliance purposes, the IRS considers a tax compliant taxpayer to be one who has filed all required returns and full paid all tax (i.e., Form 1040 liability), penalties, and interest on time. Furthermore, If you have been the subject of an IRS audit or IRS levy, keep these rules in mind in order to request a release of the lock in order.

If you have a received an IRS withholding order, contact a tax lawyer to discuss your options to resolve it.