Recovering wage overpayments can be a time-consuming and sometimes challenging process for payroll tax deductions professionals. State laws governing recovery of employer overpayment and adjustment of related taxes often vary from the federal rules and from state to state. Recovery may be difficult or cause hardship for employees, particularly in termination cases. Understanding your compliance obligations and responsibilities to your employees is critical.
Employment terminations will be discussed as an area of particular susceptibility to wage overpayments and how problems related to terminations can be minimized.
When errors do occur, it is important that employers follow appropriate procedures for making corrections and recovering overpaid amounts.
Recovery of an overpayment in the year the overpayment occurred will be distinguished from recovery in a subsequent calendar year. This includes recovery and repayment of overpaid taxes and the special problems with fringe benefits based on wages and corrections or amendments to payroll and wage reports such as Forms 941 and W-2.
Why Should You Attend:
Wage overpayments can be a source of significant cost in terms staff time spent in analysis and correction. Compliance issues and errors made during the correction process can add to the costs.
Accuracy is an essential element in the payroll deductions process, but error-free payrolls are rare. A 2008 survey by CyberShift and the American Payroll Association found that 20 percent of employers reported error rates of 1 to 5 percent of payments during typical payroll processing.
In the case of overpayments, employers must abide by federal wage and hour law, and cannot simply deduct money from an employee’s paycheck. In some cases, this could result in violation of minimum wage or overtime rules or the requirement to pay full salary to exempt employees. In a number of states, employers may not recover wage overpayments through payroll deduction without the consent of the employee.
Areas Covered in this Webinar:
When overpayments may be recovered using payroll deduction and when payroll deduction may be limited by state or federal wage and hour laws or when employee consent is required
Alternative recovery methods when payroll deduction is not allowed or not possible. For example, in the case of a former employee
Special procedures that apply to subsequent year recovery. This includes a discussion of same calendar year recovery, why repayment of net pay rather than repayment of gross pay can cause problems, and why subsequent year recovery does not affect wages for the year of recovery
Tax computations when there is a partial recovery
Wages and tax reporting for the year of the overpayment and the year of recovery
Best practices wage overpayments compliance training for avoiding, detecting, and controlling
The common causes of overpayments such as late termination paperwork, leave of absence errors and failure to terminate automatic payments
How establishment and communication of employer policies and internal controls can prevent overpayments and minimize costs
Know the common causes of wage overpayments
Understand how company policies and controls can minimize wage overpayments or mitigate the effects of wage overpayments
Know the federal and state rules with regard to recovery of overpayments and the consequences of non-compliant recovery methods
Understand the procedures for reporting recovery of wage overpayments during the year of overpayment, a subsequent year, and for partial repayments
Know how to compute and report tax adjustments for repayments
Who Will Benefit:
Payroll Supervisors and Personnel
Payroll Service Providers
Tax Compliance Officers
Employee Benefits Administrators
Officers and Managers with Payroll or Tax Compliance Oversight
Company/ Business Owners
Public Agency Managers
Audit and Compliance Personnel/ Risk Managers
Pat Haggerty is a tax practitioner, author, and educator. His work experience includes non-profit organization management, banking, manufacturing accounting, and tax practice. He began teaching accounting at the college level in 1988. He is licensed as an Enrolled Agent by the U. S. Treasury to represent taxpayers at all administrative levels of the IRS and is a Certified Management Accountant. He has written numerous articles and a monthly question and answer column for payroll publications. In addition, he regularly develops and presents webinars and presentations on a variety of topics including Payroll tax issues, FLSA compliance, and information return reporting.
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