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Incorrect Payroll Affect Taxes

Hello, long story short, I was overpaid my first week at this job by 40 hours. When I brought it up, my employer took the over-payment over a couple paychecks. I am wondering how, if so this will affect my taxes. I am not sure how to tell if I was taxed twice, from the error and when they deducted the error from my paychecks. How do I find out if I got taxed twice?


  • Your employer should be adjusting the taxes for the recovery of the overpayment. To check for the Social Security taxes, multiply your year to date gross pay by 6.2% - that should be very close to the year to date amount withheld for Social Security tax. Similarly, multiply the year to date gross pay by 1.45% and that should be very close to the year to date withholding for Medicare. By very close, I mean that any variance should be within a few cents - this would be due to rounding errors. For income tax, it is a bit more challenging - You can compare what should be withheld per IRS Publication 15, Employers Tax Guide based on your current W-4. However, amounts withheld for federal and state income tax are credits against the income tax computed on your tax return (Form 1040) and any you over or under withholding is sorted out there.

    Assuming the overpayment occurred in 2018, if your employer recovers all of the overpayment before December 31, the tax withholding should be correct for 2018. If not, there are special rules involved for a subsequent year repayment. If is best for you if the overpayment is fully repaid before December 31, Any amounts that the employer does not recover from you - including withheld taxes - before year end remain taxable for 2018 and, even if recovered from 2019 payroll do not adjust 2019 wages and and taxes. 2018 Social Security and Medicare wages and taxes are reduced for any subsequent year recovery and the employer must refund the amount of Social Security and Medicare tax to you that you repaid in 2019 and issued a correction to the 2018 W-2 for those amounts. However. 2018 income tax wages and taxes are not adjusted. Instead you may be allowed an adjustment on your 2019 Form 1040 for the excess 2018 income tax on the repaid amount. You want to avoid that even if you have to repay the overpayment outside of payroll so that it is fully repaid before December 31..

  • Agreed with other comment. One other point. From the employer's standpoint, their legally mandated objective is not to help you get your 1040 withholding perfect for year end. It is to use one of the legal withholding methods IRS mandates for employers. Payroll normally has hundreds of balls in the air at once, and trying to give one employee special treatment not required by law risks taking their eyes off the other balls. Most well run payroll departments do things exactly the same way every time. Their objective is keeping IRS happy, not you. No offense.

    Now I personally tend to fix any error that was my department's fault even when not legally required. But this is my personal bias, not a legal requirement, and I do it myself, not staff. I know enough about the legal requirements to know which lines I can legally cross and which I cannot. I do not want staff making those types of decisions. I want them to follow our normal policies and procedures to the letter, and not get creative. I want payroll to be 100% between the lines unless I specifically decide otherwise. Many requests that sounds perfectly reasonable to employees (or HR) in fact are illegal.

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