I have received a $30K bonus in 2023 and I returned the full gross amount (including FICA taxes) in 2023 as I left the company early. I am trying to recover the over-collected FICA taxes upon the repayment.
The employer issued a W-2 with boxes 1, 3, 5, and 16 reflecting my reduced compensation (by $30K) upon the return of the bonus and kept boxes 2 and 17 to state the actual (over-collected) federal and state tax, respectively. That's all good so far and proves the over-collection of federal and state taxes.
However, the employer did not state the actual withheld Social Security and Medicare in boxes 4 and 6. Instead, Social Security was computed as 6.2% of Box 3 and Medicare as 1.45% of Box 5. These amounts are less than the actual Social Security & Medicare taxes withheld from the employer in 2023 and I did not receive any refund or payroll credit for the difference.
I contacted the company and they mentioned that they won't be providing a refund at this time for the over-collected FICA (Social Security and Medicare) nor will they be correcting the W-2 so that I can claim the refund myself using Form 843. Instead, they said that they will claim the refund from the IRS and provide it to me when they receive it (mentioning a very vague timeline that can take a few months).
I don't think this is how it works. According to IRS Rev Proc. 2017-28 (Section 5), about the return of over-collected FICA taxes:
"Section 31.6402(a)-2(a)(1)(ii) specifically provides that no refund for the employer share of the overpaid FICA taxes will be allowed unless the employer has first repaid or reimbursed its employee or has secured the employee's consent to the allowance of the claim for refund and includes a claim for the refund of the employee share."
I think that the employer should have refunded the difference ASAP after I returned the bonus (either as a payment or as a payroll credit). Is there something I am missing here or I should seek legal action? Who should I reach out to given that I am based in California?
