Expert: Arthur Naman - 10/31/2009

Question
Hi Mike!

My former employer (I voluntarily resigned), paid me 2 months worth of recoverable draw which totalled gross of $3000 (I'm in sales). $2000 in the first month, and $1000 in the second month. Since I did not have enough sales to exceed the $3000 draw before resigning, I now owe that draw back to the company. The company took taxes out of the $3000, paying me a net amount of $1286. I received an invoice from the company for $3000. They are telling me I owe the entire gross amount. I asked my CPA, who thinks they need to back everything out (withholding,FICA,etc), and allow me to repay the NET amount versus the gross amount. My CPA even called the HR Director to explain. She did not understand. I've asked for the HR Director to set up a conference call with their outsourced payroll provider manager, because I feel strongly that I should only have to pay for the net amount.
Similarly, they sent me an invoice for $900 for PTO overage, (I took more PTO than I had earned they tell me), but again the $900 is the GROSS amount not the net amount.
What is your expert opinion sir?
Thank you!
Anja

Answer
Keep in mind that the income taxes withheld will be reported on your annual 1040. You received, in effect, the net plus the income taxes withheld. You are "out" the FICA and medicare withheld.

Your former employer can file an amended payroll tax return to correct a prior period's reported payroll taxes and this receive a refund of the taxes paid in, both the employer taxes plus any withheld taxes.

I would expect that your CPA would be able to explain this to a competent payroll person. Do not wait to have this taken care of as it should be corrected this year.