In a conversation I had with a customer this week, we discussed why he owed so much money each year to the IRS. He is an employee from which taxes are taken directly, and at the end of the year he receives a W-2 detailing the amount of earnings and taxes paid. If he pays his taxes out of each paycheck, how does he owe more at the end of the year? Well, he did not have the correct amount of taxes witheld from his paycheck. Therefore, at the end of the year he had not paid what he owed to the IRS.
He asked me if the IRS can make him change this. The answer to this question is...YES! The IRS may direct your employer to withold additional taxes from your paycheck to cover the appropriate amount needed which is done through a "Lock-in Letter." At this point the amount of witholdings on your W-4 Form become null and void and your employer MUST increase the tax rate on your paycheck. You will also be sent a copy of the letter and given a period of time before the changes are effective. If there are specific circumstances for the decreased witholdings or proof that they are accurate, you can submit a new W-4 Form with documentation directly to the IRS to try and reverse the changes made. However, once a Lock-in Letter has been issued only the IRS can make those changes, so your employer cannot do anything until a change confirmation has been received from the IRS. So keep your witholdings correct, your returns filed and your taxes paid and you won't have to worry about any IRS interventions on your next paycheck.