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Get your taxes done using TurboTax
Let me break this down into parts.
Did they reduce your box 1 taxable wages but not your box 2 federal withholding? This is correct, they withheld what they withheld, and that's a credit to your account with the IRS. It was correct that you repaid the gross amount. With your box 1 wages being less, you should now have a significant overpayment of your federal withholding resulting in a larger than normal tax refund.
Did they also reduce your box 16 state taxable wages but not your box 17 state withholding? This is also correct, for the same reason, and you should expect a larger than normal state tax refund.
Did they reduce your box 3 and 5 social security and medicare wages but not change your SS and medicare tax? This is a bit odd, but it will result in your tax being too high (box 4 should be 6.2% of box 3 and box 6 should be 1.45% of box 5). If the taxes are too high, this will help prove your case when you file form 843. However, Turbotax will complain about it, but hopefully will still let you e-file.
If they reduced box 3 and 5 wages AND ALSO reduced your box 4 and 6 taxes, they should refund those taxes to you directly. If they don't, you will have a problem with form 843 since it will look to the IRS like they did refund the taxes. You will want to get a letter from the company explaining what they did, to support your 843 filing. If they did not reduce boxes 3-6 at all, you will have an even trickier issue with your form 843. (However, remember that the maximum value for social security wages in Box 3 is $160,200. If your wages were $200,000 and were corrected to $170,000 with the bonus payback, that won't change box 3 and box 4 and you aren't entitled to a refund since your salary is still more than the maximum SS base wage.)