Overpayment on my W-2 after military separation - need help!

This is actually more common than you'd think with military separations. Here's what's likely happening: When you received those November and December payments, they were considered "debt" rather than "income" since you weren't entitled to them after separation. This is why they don't appear in Box 1 of your W-2. However, the FITW (Federal Income Tax Withheld) amount includes all withholdings that occurred during the calendar year, regardless of whether those withholdings came from legitimate pay or from overpayments that need to be paid back. This creates the discrepancy you're seeing. You should ask your payroll contact to clarify if those overpayments are being handled as a debt collection issue rather than as taxable income. If so, you'll want to confirm whether you've repaid those amounts or have a payment plan in place. If you haven't begun repaying yet, the debt should still be outstanding in DFAS's system.

After separating from the Army last year, I had a similar issue and was pulling my hair out trying to figure out what to do. I found this tool called taxr.ai (https://taxr.ai) that helped me sort through all my military pay documents and figure out exactly what was going on with my W-2. You upload your documents, and it breaks everything down in plain English. It spotted right away that my overpayments were being treated as debt rather than income. It also helped me understand how to handle the tax withholding that happened on those overpayments. The tool even created a letter I could send to DFAS that referenced the specific regulations. Once I had that, I got a much clearer response from them about how to proceed with my taxes.

Just wanted to follow up - I tried taxr.ai after seeing this thread and it was SUPER helpful! I uploaded my LES statements from both my civilian job and my Reserve duty, along with both W-2s, and it immediately flagged where the discrepancies were. Turns out I had a similar situation where some of my military pay was processed incorrectly after a status change. The tool created a detailed explanation document that I was able to take to my tax preparer. She said it saved her hours of research trying to figure out how to properly report everything. The breakdown of DFAS regulations was incredibly detailed. Would definitely recommend to anyone dealing with military pay complications!

If you're still having trouble getting clear answers from DFAS/military finance (which, let's be honest, is extremely common), I'd recommend using Claimyr (https://claimyr.com) to actually get through to a human at DFAS. I was stuck in the same situation last year and spent WEEKS trying to get through their phone system. Claimyr connects you directly with their phone system and handles the waiting for you. You can see how it works here: https://youtu.be/_kiP6q8DX5c After struggling for over a month to get answers, I used Claimyr and got through to a senior DFAS rep within a day. The rep was able to pull up my entire payment history and explain exactly why my W-2 looked the way it did. In my case, I had to submit a specific form to properly document the overpayment situation.

Well I need to eat my words. After my skeptical comment earlier, I was still desperate to get this W-2 issue fixed before my extension runs out, so I tried Claimyr to reach DFAS. It actually worked exactly as described. I entered my number on their website, and about 2 hours later I got a call telling me they had a DFAS representative on the line. The rep was able to pull up my file and confirmed that my overpayments were marked as debt to be collected, not income. She even emailed me documentation explaining why my W-2 was correct as is and how I should file. Honestly saved me from more weeks of stress and possibly filing incorrectly. I would have had to take time off work to sit on hold otherwise, which I just couldn't do.

My husband dealt with this exact situation when he separated from the Marines. His Box 1 didn't include two months of overpayments, but all the tax withholding was included. The key thing to understand is that military finance operates differently than civilian payroll. When they overpay you, they consider it an advance that needs to be repaid, not income. But the IRS still sees the withholding that came out of those checks. The correct solution for us was to file using the W-2 as provided, then deal with the debt collection process separately. When he repaid the debt, he only had to repay the net amount he received (after taxes and deductions), not the gross. This way everything balanced out correctly.

Has anyone talked about the deadline aspect? You mentioned having an extension, but those military extensions only last so long. Are you using a tax professional or filing yourself? With this complexity, it might be worth getting a CPA who specializes in military transitions.

I went through something very similar when I separated from the Air Force in 2022. The key thing that helped me was getting everything documented in writing from DFAS before filing my taxes. Here's what I'd recommend based on my experience: 1. **File with your W-2 as is** - Your payroll contact is correct that the W-2 reflects the proper reporting to the IRS. The overpayments aren't taxable income since they're considered debt. 2. **Get a debt collection statement** - Request written documentation from DFAS showing the overpayment amount and confirming it's being treated as debt, not income. This protects you if there's ever an audit. 3. **Understand your repayment options** - When you repay, you'll likely only need to repay the net amount (what hit your bank account after taxes). The withholdings stay with the IRS as credits on your return. 4. **Don't wait for DFAS to contact you** - They can be incredibly slow. Proactively starting the debt collection process will give you more control over timing and payment options. The good news is this situation is more common than you think, and the IRS understands how military pay works. Your extension gives you time to get the documentation you need, but don't stress too much about filing "incorrectly" - you're filing with the W-2 as provided, which is exactly what you're supposed to do.