My Georgia ex employer suddenly woke up after a year and tells me that their payroll provider made an error and paid me an extra $5000 in 2020 (gross). I've already filed my 2020 taxes and resigned in March 2021 (for which they have sent me a W2 but didn't correct any overpayment in that). Now they want me to refund the entire gross amount. I'm stuck because now I've already paid the federal, GA state and FICA taxes but the employer want the entire gross amount. What are my options here:
1. Do I need to file an amended return for the 2020 year to claim my state, federal and fica taxes?
2. Can I claim credit on the 2021 years return for the federal, GA state and FICA taxes paid back to the employer?
3. Can I ask them to send me a corrected W2 for 2021 which shows an adjustment of the gross amount repaid to them in 2022 for the 2020 overpayment? (in this case because my 2021 W2 would be lowered and so it'll automatically come back to me a tax refund for overpayment of taxes, is that correct?)
4. Any other options?
I can ask I ask the employer to eat the taxes paid or any losses I incur during this process (filings costs, CPA, taxes etc)?
What's the easiest and cheapest way to handle this?
Also, does the same principle also apply to joining bonuses paid which need to be repaid back or is that different because this an employers error and the joining bonus repayment is a contractual agreement.
