Hello everyone,

I worked at company A last year and recently found that they overpaid me in December 2009 (the income was taxed,of course). Now they want me to give back the full amount they overpaid (which means tax is included) and let me go to IRS to get the tax back. Here is what they say:

""Since we have now crossed the calendar year, the repayment falls
under the claim of right per IRS regulations.... The repayment would be in
2010 and therefore you would have to reference IRS publication 525 to see
how to claim the repayment for the 2009 portion.""

I can return the overpayment after tax, but dealing with IRS on the stuff and taking the risk not getting the money back because of THEIR fault is not what I want to do.

So my question is:
Am I obligated to do this? Are they legally right to ask me to do this?


Thanks a lot!

CDER

The amount that you return to your employer, you will report it as "Other income" with (-) sign on your tax return for 2010. It will reduce your taxable income in 2010.
You do not get refund from the employer.

Thanks for the reply.

I just don't want to pay out my taxes now and get the refund later because of other people's mistakes. I need the money to pay my bills. Bills don't wait.

What I want is giving back my taxed income to the company and let them file tax deduction. It's their fault in the end, right?

Still, am I LEGALLY obligated to pay them back the full amount?




The amount that you return to your employer, you will report it as "Other income" with (-) sign on your tax return for 2010. It will reduce your taxable income in 2010.
You do not get refund from the employer.

Yes, you are obligated. If you receive an overpayment from someone, you can not just say "too bad" and keep it. I suggest you cooperate and pay it back and stay in your employer's good graces - you really don't want them suing you for it. However, your employer should be willing to be accommodating here, since it was their error, and give you the option of paying it over time -perhaps through temporary salary reduction. This would fix the problem of you having to cough up the taxes that were withheld from the overpayment, and reduces the amount of SS tax that they have to pay on your behalf. Everyone wins.

Thanks for the reply.

To make it clear, I am willing to return the taxed income, but I don't understand why it's suddenly my obligation to pay them the taxes and to assume the risk of not getting them back from IRS (there is risk until it's in my pocket, right?).

I am obligated to take risk because of other people's mistake? It's not logical.

Can't they file an amended 4th quarter return 941 form? If they can, then I guess its not my obligation since they can claim it back? Is this logic correct?

Thank you for the help!



Yes, you are obligated. If you receive an overpayment from someone, you can not just say "too bad" and keep it. I suggest you cooperate and pay it back and stay in your employer's good graces - you really don't want them suing you for it. However, your employer should be willing to be accomodating here, since it was their error, and give you the option of paying it over time -perhaps through temporary salary reduction. This would fix the problem of you having to cough up the taxes that were withheld from the overpayment, and reduces the amount of SS tax that they have to pay on your behalf. Everyone wins.