Expert: Shirley McAllister, CPP, PHR - 1/12/2009

Question
QUESTION: I have an employee that received a paycheck in error. She promptly cashed it before the error was discovered. She is making very minimum payments (actually only 2 payments of $10.00 ea).  If she has not fully reimbursed the overpayment amount by 12/21/08- would the balance show on her W2 as income?

ANSWER: Yes it would. If she than repays in 2009 it must be taken off the 2009 W-2.

Shirley

---------- FOLLOW-UP ----------

QUESTION: What if the employee, (now ex) repays in 2009 and she does not have earnings. Would I have to correct her 2008 W2 next year?

Answer
If you entered it as income in 2008 and it is repaid in 2009 than you would have to correct the 2008 to remove the income.

If you decide to not put it on the 2008 you will not have to correct it in 2009 if it is repaid, however, if it is not repaid than she will not be charged with the amount on her tax forms. You could than send a 1099 with the amount for 2009 for the amount unpaid.

Shirley