Employer Overpaid Federal Income Tax in 2025

[user17732630820]

My employer overpaid me in 2025. I have not filed my 2025 income tax return.

In January 2026, I repaid my employer the net amount of the over payment.

In February 2026, my employer sent a W-2C that corrected:

1. Boxes 1,3,5, and 16 each were lowered by the gross amount of the over payment
2. Box 4 was lowered by the overpaid Social Security amount
3. Box 6 was lowered by the overpaid Employee Medicare amount

   No corrections were made to the Federal Income tax (box 2) or Minnesota State Income Tax (box 17).

   Now my employer states that I should repay them the overpaid income tax and then they will issue a second W-2C that lowers the overpaid income tax in boxes 2 and 17.

   My employer says I should complete my 2025 tax return using the second W-2C that they will send. 

   It does not seem like I would get the overpaid tax back if I follow my employers advice.

   Please help

[Opus 17]

You should get a refund from the employer in the amount of the reduction in the box 4 and box 6 taxes.

Otherwise, the rest is good to go.  Whatever was withheld for federal and state taxes (box 2 and 17) is already credited to your account with the IRS and the state.  When you file your tax return, because your wages are lower (box 1 and 16), your tax calculation will be lower.  Since you have more money to your credit from withholding, you will either get a larger refund or owe less than otherwise.

Your income tax owed to the government is based on your box 1 and box 16 wages only, plus any other income, deductions and credits.  Once the tax amount is calculated, Turbotax looks at your payments and withholding.  If your payments and withholding are more than your tax, you get the difference as a refund.  If more is withheld, there is more to get back. 

[user17732630820]

I think you are saying that my employer should not send a second W-2C after I repay them the income tax that was credited to my account. Is this correct?

[Opus 17]

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@user17732630820 wrote:

I think you are saying that my employer should not send a second W-2C after I repay them the income tax that was credited to my account. Is this correct?

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You can do either and it will come out the same on your end.

I would leave the first W-2C alone.  Yes, there is extra withholding in box 2 and box 17, but you get that back when you file your return.

I am having a hard time understanding the other option.  If they lower the box 2 and box 17 amounts on your W-2, they should be filing an amended form 941 and getting that money back from the IRS.  They would then pay that to you, not the other way around.  I think the employer has the math wrong on the second  option.  I would stick to the first W-2C, don't ask them for other corrections, and get your money back as part of your tax refund when you file your return.  

[user17732630820]

Thank you for the response. I will use the first W-2C