Hartford Insurance determined they overpaid for long term disability in prior years. They are keeping all monthly payments until over-payment is paid in full. I received a W2 for the total payments but this money was never received. How do I show this on my taxes?
Report the W-2 exactly as written.
The other choice would have been to ask you to file amended returns for the years you received disability pay but were not eligible. Reporting that you received income this year that they did not actually pay to you is the simplest approach for Hartford, and for you. Either way, you would owe tax on the payments. This way, you only have to file one tax return.