Recent paychecks are smaller for some feds due to National Finance Center error

This story has been updated on Friday, Jan. 17 at 9:30 a.m. to indicate that some NFC employees have received larger paychecks than usual. 

Recent paychecks for some federal employees may look smaller — or even larger in other cases — than usual, as the National Finance Center is attempting to resolve a processing error that has incorrectly withheld federal taxes.

The error, the National Finance Center told its customers, has led to incorrect tax withholding amounts on paychecks covering pay period 26, which ran from Dec. 22, 2019 through Jan. 4, 2020.

“The National Finance Center has identified the root cause of the issue and continues to test and perform analysis on the system calculation of the federal tax withholding for pay period 26,” NFC said in a Jan. 14 update to its customers. “NFC is dedicated to giving our utmost attention to this issue and determine the appropriate corrective action to resolve.”

The National Finance Center first informed its customers last Friday it had discovered the processing errors. The checks were dated Jan. 13, though technically cover the last pay period of 2019.

It’s unclear, however, exactly how many federal employees received incorrect paychecks due to the NFC error.

The Agriculture Department, which operates the National Finance Center, didn’t respond to questions about the error,  how many NFC employees were impacted and when the issue would be resolved and affected customers made whole.

The National Finance Center processes payroll for about 650,000 employees.

As of Jan. 14, the NFC was still compiling data of the impacted employees, the payroll provider said.

“Updates will be forthcoming as additional information becomes available and the corrective action is finalized,” the NFC update reads.

Employees who didn’t submit a new withholding certificate, otherwise known as “Form W-4,” for 2020 may have been impacted, the NFC said in an update to customers.

Federal employees with a “single” marital status were withheld as “single” but also at two additional exemptions, the payroll provider said. Employees with a “married” status were withheld as “married” and three additional exemptions.

Federal employees who did submit a new tax withholding form for 2020 aren’t affected, NFC said.

The processing errors mean that for some employees, more of their income has been withheld than it should. For others, it means less income has been withheld.

One Federal News Network reader said he was taxed at a rate that’s 118% higher than usual, and his most recent paycheck reflected a loss of hundreds of dollars, which has caused hardship for him and his family.

Another Federal News Network reader said his paycheck is larger than it should be, meaning he may need to pay a sum back once the errors are resolved.

A Jan. 13 email from the Commerce Department, an NFC customer, said employees didn’t personally need to take action.

“NFC is taking the necessary corrective action to resolve this issue and expects withholdings to be corrected in time for pay period 1 paychecks,” the email, which Federal News Network obtained, reads.

The next pay period for NFC employees covers Jan. 5 through Jan. 18. Paychecks are due Jan. 27, according to a schedule of payment dates on the NFC website.

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