If an employee has been overpaid by the University, it is considered a legal debt and must be repaid in full.
- Finance-Payroll Department will initiate recovery efforts on overpayments as soon as discrepancy is detected
- Departments should not initiate collection
- Departments/employees should notify Finance-Payroll of overpayment in writing using the Report an Overpayment form.
- Completed forms will route to the Payroll team's queue in Salesforce for review and processing.
The Finance-Payroll Department intends to work amicably with affected employees while administering state regulations, for an orderly return of excess payments to the University without causing undue financial hardship to employees.
Recovery Method
ACTIVE EMPLOYEES
- Finance-Payroll Department calculates amount to be repaid to University
- Finance-Payroll Department will coordinate with the employee to have the overpayment amount recovered through payroll deduction
TERMINATED EMPLOYEES
- Finance-Payroll Department calculates amount to be repaid to University
- Employee is sent an invoice by each entity's Accounts Receivable department
- Employee can repay the debt by credit card or personal check
Recovery Amount
The amount of overpayment collected by the Finance-Payroll Department will vary depending on whether the current and/or prior calendar year records need adjustment.
CURRENT CALENDAR YEAR
- If repayment is made the same calendar year as the overpayment, employee will repay net amount of the overpayment
- Finance-Payroll Department will reduce employee’s taxable wages and associated taxes for that calendar year and the year-end W-2 Form is correct
PRIOR CALENDAR YEAR(S)
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If repayment is not made in the same calendar year as the overpayment, employees must repay net amount of the overpayment plus associated federal and state taxes (taxes are permanently credited to employees on December 31 and cannot be subsequently recalled)
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Finance-Payroll Department can only recover the applicable Social Security and Medicare taxes
- Since the University can recover the Social Security and Medicare taxes, it will reduce the repayment amount by those associated taxes, if applicable
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Employees must provide a written statement that they will not request a refund of Social Security and Medicare taxes as well from the IRS (using FICA Release Letter form)
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Wages paid in error in the prior year remain taxable to employees for that year because they received and had use of those funds during that calendar year
- Employees are not entitled to file an amended tax return for that year
- They are entitled to a deduction (or credit, depending upon the amount repaid) for wages repaid on their personal income tax return in the year of repayment
- Once repaid, the Finance-Payroll Department will issue a
- corrected W-2 Form, reducing only applicable Social Security and Medicare wages and taxes
- Statement of Corrected Income detailing the amount repaid by the employee and the year repaid
- Employees can use Statement of Corrected Income for their current tax return for a credit or deduction
- Employees should consult the IRS Publication 525 (Repayments) about reporting the repayment of wages for a prior year