@CindyKR
This is what I am reading, and my opinion on next steps.
"However, I already filed my taxes as if I received the income in my name and ssn on the appropriate 1099-MISC. I reported the amount on the W-2 Box 1 as the amount in Box 3 of the 1099-MISC. And, the fed and state taxes that were reported by the employer on the incorrect W-2 for my spouse, I reported on TT as my 1099-MISC taxes in Box 4 and Box 16."
This appears to be correct, and I don't believe you have any need to file an amended 2023 return.
"Payroll will correct [your spouse's] 2023 W-2 to zero earnings and taxes. We will send you a copy of the W2c (correction) once it has been processed."
This should mean that the IRS will not question why the original W-2 was not on your return.
"Once you provide us with a W-9, we will request AP to issue a check for the taxes withheld in 2023. The AP check and 1099-MISC form will be dated 2024."
The 2024 date is correct, because this will represent the date of the repayment of the taxes to you. The employer should only refund the SS and medicare tax. They should not refund the federal and state withholding, since that was already paid to the state in your spouse's name, and you already properly included it on your 2023 tax return.
- If they only refund the SS and Medicare tax, then your saga is over. This money is not taxable income on your 2024 return even though they issue a 1099. There will be a way to enter the 1099 on your 2024 return and show that it is not taxable.
- If they refund the SS and medicare tax and also the federal and state withholding, then the federal and state withholding is taxable income to you in 2024 (the year it was paid to you) because it is a "taxable recovery" -- a reimbursement of a previous amount you claimed as a credit. I do not believe you file an amended 2023 return, instead, you report the taxable recovery in 2024. The portion of the refund that includes SS and medicare tax is still not taxable. And again, there will be a way to enter the 1099-MISC on your 2024 return and indicate that it is only partly taxable.
As I think you pointed out, they should also issue a 1099-MISC to your spouse dated 2023, for the wages. But it doesn't matter to you if they don't, because you already reported the income and paid tax on it.
Either way, in my opinion, you are finished with your 2023 return.
Q1. Should I insist (or clarify) that they send me a 1099-MISC for the 2023 tax year in my name and SSN? What if they refuse?
They are correct that if they refund the taxes to you in 2024, they will issue a 1099-MISC to you in 2024. It may not be taxable, as I indicated. They should also issue a 1099-MISC to your spouse in 2023 for the wages, but it does not change your situation if they don't.
And, they want to send me the refund of the Medicare and social security taxes as income to me in 2024.
Q2. Is that the way it should be handled?
Yes, if they refund the SS and medicare taxes to you, then the saga is over. They may be required to issue a 1099-MISC to you, because of how the 1099 rules apply to them. But if it is only a refund of the SS and medicare tax, then it is not taxable to you even if there is a 1099.
