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No, that isn't quite the way it works, of course you might contact the employer's payroll to see how they intend to handle it, but the IRS will see this as "Income Under A Claim Of Right". 

Using the example above, your employer paid you 100,000 and reported that you earned 100,000 in 2022. 

2022 taxes were taken from you based on 100,000 earned. 

Everyone realized that you were overpaid 60,000 but 2022 was over, so no repayment nor any W-2 adjustment could be made for that tax year.

Your employer should get a refund for the FICA (social security) tax you and your employer paid based on that additional 60,000 since you did not really earn that much and since you will be repaying your employer the 60,000 they never should have given you. You'll need to speak with your Payroll Department concerning that. They might have applied it to your 2023 obligation or plan to apply it to your income for 2024 when the repayment is made. This was money deposited into your social security account. 

YOUR EMPLOYER DOES NOT GET THE FEDERAL NOR STATE INCOME TAX REFUNDED. It is too late. 

You MIGHT be able to get the excess funds out of the 401(k) if that is considered to be a "Mistake of Fact". 

Talk to the Payroll Department about that.  Most likely this was before-tax funds, so you would not have paid income tax on the money deposited into the 401(k) and if those funds are now returned to you, that amount will be subject to state and federal taxes for the year the funds are returned to you. 

You really did get the 100,000 even if you only SAW 60,000.  No one SEES the full amount reported in Box 1 on a W-2 since taxes, retirement funds, health insurance premiums and other costs are subtracted before the paycheck is printed. 

60,000 more is what came out of your employer's pocket and that is what you have to pay back. 

It wasn't the employers fault that it dropped down to 36,000 by time it got into your pocket. 

They overpaid you 60,000 so that's what you have to pay back (although the overage you paid in FICA tax should be credited to you if the employer had that refunded) 

According to the IRS: page 38

" If you had to repay an amount that you included in your wages or compensation in an earlier year on which social security, Medicare, or tier 1 RRTA taxes were paid, ask your employer to refund the excess amount to you. If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection to support your claim. File a claim for refund using Form 843."

The correction on the W-2 C will only correct for this reduction in FICA tax, it DOES NOT correct income tax paid. 

Ok, so in 2022 you paid income tax on money you now will need to return. 

IN THE EYES OF THE IRS, you got that money in 2022, so you are liable for paying that tax in 2022. (which you did) 

You DO NOT amend 2022 because nothing changed, you did not pay the excess money back in 2022. It's over. 

Now, if you pay the 60,000 back to the employer in 2024, you will take a CREDIT on your 2024 tax return. In essence THIS is where the tax you paid in 2022 for the income you received in error is reconciled. The credit will reduce your 2024 tax liability and hopefully this credit offsets the higher tax you paid on your 2022 return.  basically you are figuring what the extra 60,000 cost you in tax in 2022 and subtracting that amount from your tax liability for 2024 (the year you repay the overpayment) 

According to the IRS:

“If you had to repay an amount that you included in your income in an earlier year, … if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. ”

“Figure your tax for the year of repayment claiming a credit for the repaid amount. 

Follow these steps. 

1. Figure your tax for the year of repayment without deducting the repaid amount. 

2. Refigure your tax from the earlier year without including in income the amount you repaid in the year of repayment. 

3. Subtract the tax in (2) from the tax shown on your return for the earlier year. This is the credit. 

Subtract the answer in (3) (the credit) from the tax for the year of repayment figured without the deduction (step 1).”

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