Overpayment of 2020 wages due to employer error - W-2c issued

[boulderbri]

On 12/31/20 my employer accidentally paid me a discretionary bonus of $16,625 (gross) that I should not have received, along with my regular wages on the same paycheck. On 2/21/21 I repaid $10,555.64 which was my employer's best estimate of the net bonus amount I had received after taxes. 

My employer uses Tri-Net as a benefits platform, and Tri-Net issued me a W-2c with my Medicare wages reduced by only $10,710.95, not the gross overpayment of $16,625. In my mind, I have still overpaid taxes on $5,914.05 in reported income due to my employer's error.  Can I make a Claim of Right on my 2020 taxes (I have not yet filed) or will I need to wait for 2021 filing? 

I file married jointly and was planning to take the standard deduction in 2020 (before this issue).

Thank you! 

[ErnieS0]

It depends on what the $5,914.05 was for. If the remaining amount was federal income tax withheld and Social Security and Medicare tax, then you cannot file a claim of right for those amounts.

The excess federal income tax will be added to your withholding.

You can ask your employer to refund Social Security and Medicare. If your employer refuses, you can file a claim for refund using Form 843.

Related Resources:

• See Repayments in Publication 525 (2020), Taxable and Nontaxable Income

[boulderbri]

Thanks Ernie for the response.  The $5,914.50 is overstated Medicare wages still (in my mind at least). I have no way of knowing exactly what taxes were withheld that applied to the overpayment, because the overpayment  was blended with my regular wages. Tri-Net (our benefits provider) refuses to refund anything, and the only thing they would do is provide me a corrected W-2c with a reduced Medicare wages and Medicare tax withheld amount, in an amount that doesn't make sense to me. I believe I'm being penalized for my employer's error.

Overpayment from my employer in 2020: $16,625 (before tax)

Amount I paid back in Feb '21: $10,555.64 (estimated net after tax amount I received)

Reduction in W-2c Medicare wages (corrected Box 5): -$10,710.95  (don't know where Tri-Net came up with this  number)

Reduction in W-2c Medicare tax withheld (corrected Box 6): $-155.31

Still confused as to where to go from here.