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I have to repay approx. $2500 in 2016 wages in 2017. But if I take an itemized ded. on 2017 wages, I end up getting less than my standard ded. How do I reclaim my wages?

I've actually asked this question before, but I wanted to do so again with more detail to make sure I'm not missing anything.

My employer overpaid me in November 2016. They claim that they overpaid wages as well as withholding (e.g., federal, state, social security, and medicare) and employee deductions. They failed to catch the situation until 2017. Consequently, I'm having to pay them back in 2017. As I understand it, this means that I am now require to pay back gross pay rather than net pay. That way they recover the overpaid withholding and deductions. They claim that they are unable to recover some of these (at least the federal and state withholding) directly from the parties to whom they overpaid on my behalf. They tell me that I will be able to recoup the overpayments in federal and state withholding on my taxes and that I will have to speak with a tax professional about how to do so.

However, in my research, everything I find about recouping my loss (like Publication 525) tells me that I should claim the repayment as a deduction against my 2017 income, because the repayment amount is less than $3000. However, if I do so, I will lose notably more by not taking my standard deduction. So, in effect, I can't reclaim my lost withholding. And I know of no way that I can, through taxes, reclaim anything for overpaid employee deductions. Moreover, I'm not working right now, so I may not have substantial income for 2017 against which to claim the deduction. 

So my questions are: 

1. Is there any way that I can recover the overpaid withholding or employee deductions when filing my taxes? Or am I going to be at a net loss because my employer made a mistake?

2. I have also found evidence throughout this situation that suggests my employer might have made a subsequent mistake and is telling me the wrong amount of withholding and employee deductions now (in their overpayment calculations). Is there a way for me to confirm with the IRS how much they received from my employer in withholding for me so that I can use that to hold my employer accountable and keep them from requiring me to repay money that they never actually paid on my behalf?

3. When my employer issues me a new W-2, what fields should I expect to see changed?

I very much appreciate any help the AnswerXchange community can provide.

This feature is pending. Thanks for your patience.
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1 Reply
Intuit Alumni

I have to repay approx. $2500 in 2016 wages in 2017. But if I take an itemized ded. on 2017 wages, I end up getting less than my standard ded. How do I reclaim my wages?

There's good news and bad news.

First of all, because you were paid as an employee and not as a contractor, you only owe your net pay, not the gross. It's your employer's responsibility to recover the excess payroll taxes from the IRS, not from you. See the answer below.


However, because the excess wages were less than $3,000, you cannot invoke "claim of right" to deduct them on line 28 of Schedule A. Instead, you must claim the excess wages on line 23, subject to 2% of AGI threshold. See below for more info.


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