Employees can be overpaid in even the most well-managed payroll department, but it isn’t always the result of an error. Perhaps the employee received a sign-on bonus but did not stay for the required length of time. Or the employee was on advanced vacation but is now terminating before he or she has fully earned the time. No matter the reason, overpayments can and do happen and must be handled properly. 

The questions that usually arise relate to IRS regulations are: what is required if the overpayment occurred this year?  But what if it occurred in a previous tax year, does that change the rules? Are the rules different for federal income tax than they are for social security or Medicare taxes? Recouping overpayments is also much more complex than just adhering to the IRS code! Wage and hour law compliance must also be honored when dealing with overpayments.

Before the payroll department even needs to determine IRS requirements they must first determine if recouping the overpayment is even legal under the FLSA. Issues such as exempt employee status, minimum wage, and overtime rules for nonexempt employees must be considered when recovering overpayments from employees. And of course, the overpayment did not occur in a vacuum when it comes to state laws. Each state may have its own compliance issues involving wage and hour laws! But the most important thing that we need to know is whether there is a time limit for recouping the overpayment in that state. Does the employee have to be notified in advance before the deductions can begin? Or does the state just say NO! to the whole process?


Handling Overpayments under IRS and State Tax Codes:

  • Why does a 1990 IRS Private Letter Ruling on handling overpayments apply today?
  • Correcting overpayments in the same calendar tax year
  • Why asking for the gross is better than the net check for prior year overpayments?
  • Correcting FICA taxes for a prior year’s overpayment
  • Correcting FUTA/SUI taxes
  • Using Form W-2 or Form W-2c to report overpayments

Wage and Hour Laws and their Impact on Recouping Overpayments:

  • The standards under the FLSA in terms of timeframe for recouping prior year overpayments
  • Is a written agreement for repayment always required under the FLSA?
  • Collecting overpayments from exempt employees and its effect on salary basis compliance
  • Recouping overpayments and their effect on minimum wage and overtime requirements
  • Can employers treat advanced vacation payments as overpayments if an employer terminates?
  • Where do the states stand on recouping overpayments?

Why You Should Attend:

We will discuss these regulations and including the private letter ruling that governs the IRS requirements. We will examine the FLSA requirements on recouping overpayments including the 1998 opinion letter that spells out these requirements. We will also discuss how to conduct research to determine the state’s requirements for handling overpayments. We will review the wage and hour laws of several states and the factors that they use to determine if an overpayment can be recouped.

Who Should Attend:

  • Payroll Executives/Managers/Administrators/Professionals/Practitioners/Entry Level Personnel
  • Human Resources Executives/Managers/Administrators
  • Accounting Personnel
  • Business Owners/Executive Officers/Operations and Departmental Managers
  • Lawmakers
  • Attorneys/Legal Professionals
  • Any individual or entity that must deal with the complexities and requirements of Payroll compliance issues

Note: You will get access to the Recording link and E-Transcript; in your account and at your registered email address.

Vicki M. Lambert, CPP, is President and Academic Director of The Payroll Advisor™, a firm specializing in payroll education and training. The company’s website offers a payroll news service which keeps payroll professionals up-to-date on the latest rules and regulations.

Course Information

  • February 10, 2023
  • Available All Day
  • 90 Minutes
  • Vicki M Lambert