COMPLIANCE
policy, be sure to look at the state laws as well (the states in which your employees are working). They may dictate specific rules around repaying / collecting the funds.
seems like a very harsh thing from the Internal Revenue Service (IRS). Prior to the Tax Cuts and Jobs Act, the employee could tax a credit on their personal income tax return for the repaid amount, but if $3,000 or less, that credit has gone away from the tax return The employee can possibly receive a credit on their personal income tax return for the repayment of overpaid wages if it’s greater than $3,000, but it all depends on personal tax situations so they should consult their tax advisor. A ‘Form 941-X, adjusted employer’s quarterly federal tax return or claim for refund’ will need to be completed and filed as well. Be sure to read up on overpayments / repayments if you have this situation, in 'IRS Publication 15, Circular E, Employer’s Tax Guide', or The Payroll Source®, Section 3.4-1. Of course, it’s best to try to eliminate overpayments from happening in the first instance. Some are uncontrollable, such as the sign-on bonuses, but others are hopefully manageable. When they do occur, you must be prepared to know how to handle each situation. Overpayment situations are also unpleasant for the employee, so be sure
to show a little empathy for their situation. None of us know the financial impact this may have on an employee’s finances, especially if the overpayment is a large amount and / or happened months ago. Develop a procedure or policy that fits the company while also adhering to appropriate treatment of the employee. Encourage repayment in the same tax year (if possible) to ease the taxation burden. PayrollOrg (PAYO), https://ow.ly/ wLps50PNR1g, is the leader in global payroll education, publication and training. This nonprofit association conducts more than 300 payroll training conferences and seminars across the globe each year and
Taxes, overpayments Does an employee who has been
overpaid pay back the net amount or the gross amount? The answer is yes, and yes. Generally, if an overpayment occurs and the employee repays the amount in the same tax year the overpayment happened, they can repay the net amount back to the company. If an overpayment crosses tax years, the employee should repay the gross amount less social security and Medicare taxes When this occurs a ‘ Form W-2c , corrected wage and tax statement’ will be required for the year of the overpayment, to correct: l box 3 (social security wages) l box 4 (social security tax withheld) l box 5 (Medicare wages and tips) l box 6 (Medicare tax withheld). Box 1 (wages, tips, other compensation) and box 2 (federal income tax withheld) should not be adjusted. This
publishes a complete library of resource texts and newsletters. Representing more than 19,000
members, PayrollOrg is the industry’s highly respected and collective voice in Washington, D.C. Get more information at https://ow.ly/aEcc50PNR4E and https://ow.ly/16WJ50PNR73.
*This article relates to US payroll practices.
P11D, EXPENSES AND BENEFITS TRAINING COURSE COLLECTION
With fines reaching up to £3,000 for each incorrect P11D submitted, these courses cover everything you need to know to stay compliant. Whether you’re new to payroll, or just looking for a refresher; pick the course elements you need to tailor your learning.
Find out more and choose the P11D courses that are right for you at cipp.org.uk/training
Scan to book
*Dependent on course options chosen.
35
| Professional in Payroll, Pensions and Reward |
Issue 98 | March 2024
Made with FlippingBook - Online magazine maker