I (US citizen working in the US) just received my paycheck and saw that my anticipated takehome pay was cut by 70% by a line item deduction titled "PYA Tax Adjustment". I have never seen this on any previous paychecks in my life and have no clue what it is; I would have contacted payroll but the office was closed on Friday due to holiday. I have read here that it refers to "prior year unallowed losses that are now deductible." I don't even understand what that means. My only guess is that it has to do with income that I incorrectly did not withhold the previous year, but I expected to simply pay this when filing my taxes? Why would it be deducted by my employer?
It turns out that in my case, my employer is the responsible withholding party. I had not properly informed them of an address change and as such had not properly withheld taxes from the new locality. The PYA tax adjustment reflects this retroactive tax withholding. I expected to simply need to make this adjustment on my own at tax time by sending the money to the locality. This was an incorrect as my employer does this themselves.