Is there any way to recover taxes paid on an accidental salary overpayment?
I'm hoping someone here can help me with a weird tax situation. Last year (2024), I was teaching part-time at a local community college and apparently got overpaid for one of my evening classes. I had no idea this was happening because I was also dealing with a family health crisis, so I wasn't checking my accounts as carefully as I normally would. Fast forward to now, and the college finance office just contacted me saying I need to repay the entire overpayment amount ($3,700), INCLUDING the portion they withheld for taxes (around $1,400). This has me really confused. If they already sent that tax money to the IRS, why am I responsible for paying it back to the school? Shouldn't they just ask for the net amount I actually received? Do I really owe them the gross amount including taxes that I never even saw in my bank account? Or should I tell them to take up the tax portion with the IRS directly? Or do I need to file some kind of claim with the IRS myself to get that money back? I'm completely lost on how to handle this. Any advice would be really appreciated!
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Madison Tipne
This happens more than you'd think! When you're asked to repay an overpayment, you typically need to repay the gross amount (including the taxes withheld). Here's why: the school already reported your full earnings to the IRS on your W-2, including the overpayment. They can't just "take it up with the IRS" directly. The good news is you can get that tax money back, but you'll need to handle it on your tax return. If you repay in the same year as the overpayment, it's simpler. Since you're repaying in the year after the overpayment, you have two options: 1. Take a deduction for the repayment on Schedule A (if over $3,000) 2. Claim a credit for the amount of tax you paid on that income Keep documentation of the overpayment and your repayment to the school. This will be important when you file your taxes next year to show why you're claiming this deduction or credit.
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Holly Lascelles
•What if the repayment is less than $3,000? The amount I have to repay is only about $2,200 including the tax portion. Can I still get that money back somehow?
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Madison Tipne
•If the repayment is less than $3,000, you can still claim it as a miscellaneous itemized deduction on Schedule A, but unfortunately these deductions are subject to the 2% AGI floor - meaning you can only deduct the amount that exceeds 2% of your adjusted gross income. For many people, especially if you typically take the standard deduction rather than itemizing, this might not provide much benefit. But it's still worth calculating both ways to see which gives you the better result. Make sure to consult with a tax professional who can look at your specific situation.
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Malia Ponder
I had a similar problem last year and discovered taxr.ai (https://taxr.ai) which was incredibly helpful. It analyzed my W-2 and payment records and showed me exactly how to handle the overpayment on my tax return. I was confused about whether to use a deduction or claim a tax credit, and their tool walked me through the "claim of right" provisions that apply to this exact situation. The best part was that I could upload the documents from my employer about the overpayment, and it identified everything I needed for proper documentation when filing. Definitely made what could have been a complicated tax nightmare much more manageable.
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Kyle Wallace
•How exactly does this work? Does it just give advice or does it actually help fill out the forms? I'm dealing with a similar issue but with independent contractor payments that were too high.
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Ryder Ross
•I'm skeptical about these tax tools... how does it handle state taxes in this situation? I had an overpayment issue and my state tax return was actually more complicated to fix than the federal.
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Malia Ponder
•The tool actually helps identify exactly which forms and schedules you need to use for your specific situation. It doesn't fill them out for you, but it creates a detailed guide that you can follow or share with your tax preparer. It's like having an expert look over your documents and tell you exactly what steps to take. For state taxes, it handles those too! That was actually a big help for me because my state (California) has different rules than federal for handling repayments. The tool identifies the specific state forms and instructions based on where you live. Each state has its own approach to the "claim of right" doctrine, and taxr.ai breaks it down by jurisdiction.
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Ryder Ross
Just wanted to follow up about my experience with taxr.ai. I decided to try it despite my initial skepticism, and I'm glad I did. My situation involved an overpayment across state lines (I moved mid-year), and the tool actually identified a special form my previous state required for repayment situations that even my accountant missed. The documentation explanation was super clear, and it saved me from taking a deduction that wouldn't have helped much (since I take the standard deduction) and instead showed me how to claim a credit that directly reduced my tax liability. Ended up getting back almost all the tax I paid on the overpayment. Wish I'd known about this tool sooner!
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Gianni Serpent
If you're trying to contact the IRS about this situation, good luck getting through on those phone lines! After weeks of trying to speak with someone about a similar overpayment issue, I found Claimyr (https://claimyr.com) and was honestly shocked that it actually worked. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was connected to an IRS agent in about 25 minutes instead of spending hours on hold or getting disconnected. The agent walked me through exactly how to document the repayment on my tax return and confirmed I needed to pay back the full amount to my employer, then claim the tax portion back through my return. Getting that official answer directly from the IRS gave me peace of mind.
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Henry Delgado
•How does this even work? The IRS phone system is notoriously impossible to navigate. Is this just paying someone to wait on hold for you?
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Olivia Kay
•Sounds like a scam honestly. No way someone can magically get through to the IRS when millions of people can't even get past the automated system. And if it does work, they're probably using some shady method that could compromise your tax info.
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Gianni Serpent
•It's actually pretty straightforward! The service uses an automated system that navigates the IRS phone tree and waits on hold for you. When an agent is about to pick up, you get a call connecting you directly to that agent. It's basically like having someone wait on hold so you don't have to. It's definitely not a scam - they never ask for any personal tax information. You're the one who speaks directly with the IRS agent, so your information stays between you and the IRS. They just solve the "getting through" problem, which saved me hours of frustration. I was skeptical at first too, but when I got that call connecting me to an actual IRS representative, I was pretty impressed.
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Olivia Kay
I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it myself since I've been trying to reach the IRS for weeks about a similar wage overpayment situation. Not only did I actually get through to an IRS agent in about 30 minutes, but they confirmed exactly what I needed to do. The IRS agent explained that I need to get a corrected W-2C from my employer showing the proper wages, then file Form 1040X to amend my previous year's return. She walked me through the whole process and even gave me specific line references for the form. Completely worth it just to get a definitive answer instead of conflicting advice online. Never thought I'd say this, but I'm actually relieved I could speak to the IRS!
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Joshua Hellan
Something important that hasn't been mentioned: the timing! If you repay within the same tax year as the overpayment, your employer can just adjust your W-2. But since you're repaying in a different tax year, you'll need to handle it on your tax return using what's called "claim of right" provisions. Basically, you have two options: 1. Take an itemized deduction on Schedule A for the repayment 2. Claim a tax credit for the amount of taxes you paid on that income Option 2 is usually better if the amount is significant. See IRS Publication 525 under "Repayments" for the details. Keep all documentation from your employer about both the overpayment and your repayment.
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Jibriel Kohn
•Do you know if this applies to independent contractors too? I had a client overpay me on a 1099 job, and I'm trying to figure out the best way to handle repaying them.
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Joshua Hellan
•Yes, these claim of right provisions apply to independent contractors as well. The process is similar, but there are some differences since you received a 1099 instead of a W-2. For 1099 income, when you repay in a later year, you'll still use the same two options (deduction vs. credit), but the documentation is slightly different. Make sure you get a corrected 1099 from the client if possible, or at minimum a receipt documenting that you repaid the overpayment. This helps establish that you're not trying to double-dip by both keeping the money and claiming a tax benefit.
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Edison Estevez
Wait I'm confused... everyone's saying to repay the full amount including taxes, but isn't that basically paying taxes twice? Once when they originally withheld it and again when paying back money you never received?
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Emily Nguyen-Smith
•You're not paying taxes twice because you get to claim the tax portion back on your tax return. You repay the gross amount to the employer, then the IRS essentially "refunds" the tax portion to you when you file your return and claim it properly. It feels like paying twice in the moment, but it all balances out when you complete your taxes. The system is set up this way because your employer already reported the full amount to the IRS, and they need their books to match what they reported.
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