Got overpaid at work and I owe employer the gross amount not net - how do I handle this?

This is definitely frustrating but there's a logical explanation for why they're asking for the gross amount. When your employer reports wages to the IRS, they report the full gross amount. If you only pay back the net, their records will still show they paid you that full amount, which affects both their tax obligations and yours. The good news is you won't actually lose that money permanently. You have two options for resolving this: 1) Pay back the gross amount now, and your employer will adjust your W-2 to show the correct earnings. In this case, the overpayment essentially "never happened" as far as taxes are concerned. 2) Pay back the gross amount, but if they don't adjust your W-2, you can claim a deduction for the repayment on your tax return when you file. Make sure to get documentation of the repayment and clarify with your employer how they'll be handling it on your W-2. If the repayment crosses tax years (like if you were overpaid in 2023 but are repaying in 2024), the situation gets a bit more complex.

After dealing with a similar payroll error, I found this amazing tool called taxr.ai (https://taxr.ai) that was seriously a lifesaver. I was getting conflicting advice from coworkers about how to handle the repayment and what documentation I needed to keep. I uploaded screenshots of my paystubs showing the overpayment and the repayment plus the email from HR, and taxr.ai analyzed everything and gave me a clear explanation of how it would affect my taxes. It even showed me exactly what forms I'd need to file and what documentation to keep in case of an audit. Super helpful for situations like this where the tax implications aren't straightforward!

Just wanted to update you guys - I tried taxr.ai after seeing the recommendation here and it was exactly what I needed! I was totally lost trying to make sense of IRS publications about repayments to employers. Uploaded my pay stubs and the demand letter from my employer, and it immediately identified this as a "claim of right" situation. It showed me that since my repayment was over $3,000, I have special options for how to handle it on my taxes. The tool even created a personalized step-by-step guide for my situation with the exact forms I'll need. Honestly, what a relief to have clear directions instead of the confusing mess of information I was finding online. Thanks for the recommendation!

If you're struggling to get through to your HR or payroll department about this issue, try using Claimyr (https://claimyr.com). I had a similar payroll mess and couldn't get anyone to explain the tax implications properly. My employer kept giving me the runaround and I couldn't get straight answers. Claimyr got me through to an actual IRS agent in about 10 minutes when I had been trying for days on my own. The agent explained exactly how the repayment should be handled and gave me the specific regulations to cite to my employer. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c It was such a relief to get an official answer directly from the IRS instead of conflicting advice from random people at my company who didn't actually know the tax code.

Alright guys, I need to eat some humble pie here. After posting that skeptical comment, I was still desperate for answers about my own payroll tax issue so I tried Claimyr despite my doubts. I'm honestly shocked - it actually worked exactly as described. After trying for TWO WEEKS to reach someone at the IRS with no luck, Claimyr got me connected in about 15 minutes. The agent walked me through exactly how to handle wage repayments on my tax return, including which forms to use and what documentation to keep. The agent even explained a special procedure for situations where the repayment crosses tax years that HR had completely wrong. Turns out I have more options than my employer led me to believe! Definitely worth it for the peace of mind from getting official guidance.

My friend dealt with this exact situation last year! Her company overpaid her by like $5k and demanded the gross amount back. She fought it initially because it seemed so unfair, but ended up having to pay the full gross amount. The key thing is to make sure they adjust your W-2 properly. If they don't, you'll be taxed on money you didn't actually keep! If they refuse to fix your W-2, you'll need to file Form 8275 with your tax return to claim the repayment. Her company initially refused but eventually corrected it after she got a tax professional to write a letter explaining they were legally required to fix it.

Just to add something others haven't mentioned - if your company doesn't handle this correctly and you end up claiming the repayment as a deduction, make sure you keep REALLY good records. My spouse went through this a couple years back and got audited because the amounts on the W-2 didn't match what we reported (because of the repayment). We had to provide all the emails from HR, proof of the repayment, bank statements, everything. It was a huge headache but we eventually got it resolved. Would have been much easier if the company had just adjusted the W-2 properly in the first place!

I went through something very similar about 18 months ago - $2,800 overpayment that I had to repay at gross. It's definitely one of those situations where you feel like you're being penalized for someone else's mistake! A few things that helped me navigate this: First, I documented EVERYTHING - every email, every conversation with HR, the original overpayment on my paystub, and proof of the repayment. Second, I pushed hard for them to adjust my W-2 rather than making me claim it as a deduction later. It took several conversations and escalating to their payroll vendor, but they eventually agreed to issue a corrected W-2. The key argument that worked for me was pointing out that if they don't adjust the W-2, they're essentially reporting to the IRS that they paid me money I didn't actually receive, which creates a mess for both of us. Most payroll departments will cooperate once they understand the tax implications. If you do end up having to claim it as a deduction, just know that it's totally doable - just keep meticulous records because the IRS will want to see proof if they ever question it. The whole situation sucks, but you won't actually lose money in the long run if you handle the tax side correctly.

I really appreciate everyone sharing their experiences with this - it's been super helpful to see how others handled similar situations! After reading through all the advice, I think my next step is going to be following the approach that worked for Javier and Chloe - pushing for a corrected W-2 rather than just accepting that I'll have to claim it as a deduction later. I'm going to reach out to our payroll vendor directly (we use Paychex) and get them to confirm they can issue a corrected W-2, then go back to HR with that information. It sounds like once HR realizes it's a standard process and not some special exception, they're more likely to cooperate. The documentation advice is also really valuable - I've already started saving every email and will make sure to get written confirmation of whatever approach we end up taking. This whole situation has been so stressful, but knowing that others have successfully navigated it gives me hope that I won't actually be out $1,000 for their mistake! Will update once I make some progress with the payroll vendor approach. Thanks again everyone!

I've been following this thread closely since I'm dealing with a similar payroll overpayment situation right now. What strikes me most is how many different companies seem to handle this incorrectly initially - it's like they have policies in place but don't understand the tax implications. One thing I wanted to add that I haven't seen mentioned yet: if you're in a state with state income taxes, make sure you understand how the repayment affects your state return too. Some states handle wage repayments differently than the federal rules, and you might need to file amended state returns or handle it differently there. Also, for anyone dealing with this across different employers (like if you left the company that overpaid you), the process gets even more complicated. You definitely want to resolve this while you're still employed there if possible, because getting cooperation from a former employer on W-2 corrections can be nearly impossible. The advice about going directly to the payroll vendor is gold - I'm definitely going to try that approach. It makes sense that they'd understand the tax compliance requirements better than HR departments who are focused on policy rather than tax law.

I just wanted to chime in as someone who works in payroll processing - the advice you're all giving is spot on, especially about going directly to the payroll vendor. I see these overpayment situations all the time, and unfortunately many HR departments don't fully understand the tax compliance requirements. Here's what I always tell people in this situation: the employer is legally required to report accurate wages to the IRS. If they don't adjust your W-2 after you repay the overpayment, they're essentially committing to the IRS that they paid you money you didn't actually receive. This creates problems for both parties and can trigger audits down the line. Most payroll vendors (ADP, Paychex, etc.) have standard procedures for handling wage repayments and W-2 corrections - it's really not complicated from a processing standpoint. The issue is usually that HR departments either don't know these procedures exist or think they're more complicated than they actually are. When you contact your payroll vendor, be specific about what you need: "wage adjustment due to overpayment repayment with corrected W-2 issuance." Use those exact terms because that's the language they use internally. And definitely get everything in writing from both your employer and the vendor about how they're going to handle it. Good luck everyone - this situation is frustrating but definitely resolvable if you know how to navigate it!