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​Refund Procedures

(see South Carolina Code of Laws § 12-8-2020 )

When Are Refunds Allowed?

  • A refund will be issued if the withholding is overpaid due to a math error or incorrect payment above the amount withheld from the employee(s).
  • Overpayments will be refunded to the withholding agent if claimed prior to the issuance of original W-2 (or 1099) forms.
  • Example: An error was made and a payment was submitted for more than the amount of tax withheld. The withholding agent should submit a WH-1605 (1st, 2nd or 3rd quarters) or WH-1606 (4th quarter) with line 1 showing the actual amount of tax withheld for the quarter. The total payments made for the quarter should be shown on line 2. Line 3 will be the amount of the overpayment to be refunded. (If an original return for the quarter has already been filed, you will file an amended return to claim the refund. An amended return uses the same form type as the original, but has the “amended” indicator box checked).

When Are Refunds Not Allowed?

  • Refunds are not allowed to the withholding agent due to the issuance of W-2c forms (corrected W-2 forms) which decrease the amount of state tax withheld.
  • Note: Taxes withheld from an employee’s paycheck belong to the employee and are held in trust by the employer. Any overpayment will be refunded from the employee’s individual income tax return.
  • Example: State taxes were withheld for South Carolina in error. The employee actually worked in another state for which the taxes should have been withheld. The W-2 form was issued showing the wages and withholding for South Carolina. Since the wages are taxable in the other state, a W-2c form should be issued showing no wages for South Carolina but continue to show all of the oringially reported South Carolina tax withheld as South Carolina withholding. A letter should be given to the employee along with the corrected W-2 form for South Carolina on company letterhead explaining that the wages were earned in another state. A W-2 form should also be prepared for the other state showing the wages earned. The employee would then file an amended Individual Income Tax return for South Carolina with the W-2c and the letter decreasi​ng the wages and claiming the withholding and a refund will be issued. The tax owed to the other state would be paid by the employee when filing that individual income tax return.
  • The employer should not file an amended Withholding return and no adjustments to the Withholding account should be made.