Lock-in letters are issued by the IRS when they determine that an employee is either not entitled to claim exempt status, or is not entitled to claim more than a specified number of withholding allowances.
The lock-in letter informs the employer to limit the employee’s withholding allowances at a specified number before a specified date. Employers failing to honor the IRS lock-in requirement could face penalty and may be liable for any taxes not withheld from the employee.
Previously, OSC received these letters and forwarded them to the appropriate agency for processing in PayServ. Agencies then changed the employee’s withholding allowance as detailed in the lock-in letter.
To streamline this process and ensure compliance, OSC will now process all IRS issued lock-in letters.