If you've spent some time in the workplace, you're probably familiar with the concept of tax withholding. Although there are several different forms of withholding, the most common one is the process by which employers withhold a given portion of funds from their employees' paychecks in order to satisfy their expected year-end tax obligations. In most cases, these withholding calculations are fairly accurate: The amount that the employer withholds ends up being close to the value of the income taxes that the employee would owe before taking into account any deductions or credits. In other cases, the withholding process can dramatically overestimate or underestimate the employee's ultimate tax obligations.
If you feel as though you've been cheated out of money on which you were counting to help cover the cost of your day-to-day living expenses, you may need to talk to your employer or the IRS to determine the appropriate course of action. In the vast majority of cases, you'll be able to solve your problem by adjusting the amount that your employer is obligated to withhold from each of your paychecks. You can visit the IRS's website to learn more about adjusting the number of tax exemptions that you've claimed.
If this isn't adequate to solve your withholding issue, you may have a different problem altogether. In some cases, individuals who work as "independent contractors" may mistakenly have their taxes withheld due to a paperwork or communication error. All employers who use non-employee contractors must keep a W-9 form on file for each contract employee who works for them. This form is meant to ensure that the IRS can keep track of all of the payments that businesses make to their contractors. Since contractors are responsible for forwarding their own tax payments to the IRS once they've filed their tax returns, they aren't typically subject to regular tax withholding practices.
Contractors who don't fill out this form before beginning their contract may find that their "employer" has withheld a significant amount from their paychecks. This is because businesses that don't file a W-9 for their contracted employees are obligated to keep track of these employees' probable tax payments. The easiest means of doing this is through "automatic" tax withholding.
Fortunately, this problem is easy to rectify: If you're a contractor, simply turn in your W-9 form before filing your taxes. Unfortunately, you may not receive the full amount of your already-withheld taxes for several months.