Wage Overpayment

[bertkesj]

I have a question about filling out a Form 843 for my situation.

In short, my employer informed me that I was overpaid for the last 5 years. I received a debt letter from them indicating the total gross paid to me (including all taxes withheld) amount and that I need to pay that back to them. I am going to make one lump sum payment to cover the entire debt.

I am trying to figure out what I need to do to have taxes paid on that income refunded back to me.

According to [Publication 17: Tax Guide for Individuals](https://www.irs.gov/pub/irs-pdf/p17.pdf#page=74😉 under *Repayments*, I can either deduct or apply a credit for the federal taxes I paid in the past 5 years on this years return (great!). Although, under *Repaid wages subject to social security and Medicare taxes*, to refund Social Security and Medicare Taxes, I need to fill out a Form 843.

I have a few questions about filling out Form 843. I think this falls:

1. Can I request a refund for *all* 5 years? The instructions indicate only being able to go back 2-3 years, but again, this falls under a *Special Situation*.
2. Which box do I check in box 4: Employment? Income?

3. Which box do I check in box 5: 941? 1040?

4. Additionally, it states that I need to ask my employer first and they can deny repaying me the excess amounts. I need to show documentation that I asked and they denied the repayment. Would an email of this communication be sufficient or something more formal required (and what would that exactly be)?
5. I know this is a lot, thanks for any input/help.

[Opus 17]

You get the federal income taxes refunded by taking a special tax deduction in the year you make the repayment, or by claiming a credit under IRC 1341 "claim of right".  The special deduction is included in all versions of Turbotax, but to claim the credit, you need to use Turbotax installed on your own computer from a CD or download so you can make a manual entry on the forms.   You can use whichever method gives you the largest refund.  Turbotax will not calculate which is best for you, you have to do that.

To get state income taxes refunded, you probably need to make a claim of right on your state tax return.  You would have to research how to do that for your specific state. 

You can only use form 843 to get a refund of Social Security and Medicare taxes withheld. 

1. You can always ask.  I don't know if this would count for an exception. 

2. Employment.

3. 1040

4. Print the email and include it with your other documentation.  

5. You should attach your calculations for each year separately, showing what your reported W-2 wages were, what the withholding was, what the wages should have been according to your employer, and what the withholding should have been (box 4 and box 6).  Remember that box 4 has an annual maximum, so if your income was, for example, $200,000 and should have been $180,000, the repayment will not actually result in a reduction of your box 4 social security tax or a social security tax refund, since both the original and corrected wages would be more than the social security max.  Box 6 withholding does not have an annual maximum.    But because of how social security withholding is calculated, you need to consider each year separately and not as one lump sum.  

Your package should include a clear letter of explanation, copies of any correspondence from the employer about the need to repay the wages, including the fact that they will not be processing a refund of social security and Medicare tax.  Include your calculations for each year, and include copies of your W-2s. I would also include proof of the repayment of wages as a lump sum (canceled check or copy of electronic receipt). 

[AmeliesUncle]

At least for the recent 3+ years, I wouldn't pay it all back to the employer.  I would subtract the Social Security and Medicare.

The employer will be (or at least should be) amending their employer payroll returns to get the Social Security and Medicare back.  If they are already getting it back, there is absolutely no reason why you should be paying to them again.