Can you clarify your question? I am having difficulty understanding what you are asking.
If you received Gross Income of of $27,000, and your net bank deposits were about $20,000, that could be corect. The $7000 difference is from (1) insurance, (2) 401k, (3) Social Security taxes, 4) Medicare taxes, (5) Federal income tax withholding, (6) State income tax withholding, and possibly some other things.
Box 1 of your W-2 should not show the 'net' it should show the 'gross taxable' amount.
Thank You. when i wrote question it had character limit, so wasn't able to write in details.
You are 100% correct and thank you for clarify in detail. I had tried my best to reach out to employer to get COBRA insurance but they just don't listen and after 2 months they cancelled all. I didn't pay anything in 2017.
My question, who would pay me $7000 which includes your point 1-6. Employer paid taxes to IRS which they should not. IRS would NOT give me all taxes, insurance money which includes in net $7,000.
Employer did mistake and they should not give all taxes to IRS. Should i need legal lawyer for this ?
I see some blogs where says if repayment is done in different year , employee needs to pay Gross but who will pay me $7,000 ?
wait to see what your 2017 W-2 shows. It's still not clear why you think you are owed $7,000.
Yes it's still not clear what the 7,000 is for. Wait for the W2 then tell us what amounts are in which boxes. How did your employer overpay you? Did you pay it back to the employer?
My W2 would show all money paid out to me in 2017 this is what HR told me. I left firm and employer overpaid by mistake even i was no longer with firm. Now they are asking for money back. I didn't give it back yet as how can i pay 7k which i never recieved.
Employer is asking all gross money paid out which includes point 1-6.
Anyone have any idea on this ?
<a rel="nofollow" target="_blank" href="https://tax.thomsonreuters.com/blog/cs-professional-suite/cs-payroll-solutions/overpayments-and-repayments/">https://tax.thomsonreuters.com/blog/cs-professional-suite/cs-payroll-solutions/overpayments-and-repayments/</a> anyone understand this ?
<a rel="nofollow" target="_blank" href="https://www.cu.edu/sites/default/files/overpayment-policy.pdf">https://www.cu.edu/sites/default/files/overpayment-policy.pdf</a> Page 5. I wonder it never happened to anyone !
Based on the article you posted, it looks like you are pretty much screwed.
Are you saying that your employer overpaid you by $27,000 Gross ($20,000) net in 2017, and now in 2018 they want you to repay $27,000?
Are you saying that your employer overpaid you by $27,000 Gross ($20,000) net in 2017, and now in 2018 they want you to repay $27,000? Yes.
You need to repay $27,000 *MINUS* the Social Security and Medicare taxes.
Your 2016 tax return has already credited you the Federal Income Tax withholding and State Income Tax Withholding. So you are 'keeping' that amount. Because you get to keep that benefit, you must repay that amount back to the employer.
You are presumably also 'keeping' your 401k contributions and insurance for that time period. Because you get to keep that benefit, you must repay that amount back to the employer.
To illustrate: Let's say the Federal and State income taxes were $3000, 401k and insurance of $1900, and Social Security/Medicare of $2100 ($7000 total).
You would repay your employer $24,900 ($27,000 minus $2100 of Social Security/Medicare). You would still keep the $3000 of credits on your 2016 tax return, and you would still keep the $1900 of 401k and insurance benefits. That will even everything out.
For simpler bookkeeping purposes, it is POSSIBLE your employer would ask you to pay $27,000, and at the same time, they would give you the reimbursement for Social Security/Medicare taxes ($2100 in the example).
For your 2017 tax return, you can report the repayment as Fanfare pointed out below.
Repayments Under Claim of Right
If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be
able to deduct the amount you repaid, or take a credit against your tax. See Repayments in Pub. 525 for more information.
Deduction is different than what i am paying extra net money. It make sense to deduct in 2019 because i am paying taxes on 2017. I need my 7,000 which i am paying more than they paid. Would IRS would pay be 7k ?
Read my comment above. You should not be required to repay your employer the Social Security and Medicare taxes, and the rest of the $7000 you have already received credit for. Nobody is going to pay you $7000.
When you do the "Claim of Right" on your 2018 tax return, it should save you some taxes on that repayment.