Expert: Shirley McAllister, CPP, PHR - 10/23/2010

Question
I received notice from my previous employer, due to an error; I was overpaid on a disbursement from my 401k or vested interest.  I was employed with that company for three years; due to downsizing, I was without a job in April of 2008.  I requested a disbursement in August or October 2008; I was taxed 30% due to early withdrawal penalties.  They are requesting a repayment of this (overpayment) now in 2010; can they request this?  Do I have to pay?  Is there a statute of limitations on something like this?  Can I calculate the 30% that I was taxed on the overpayment and deduct it from the amount they are requesting?  Do they need to prove that I owe?  This is in Wisconsin.

Answer
They need to prove you owe it and that it was indeed an overpayment. Than if you refuse to pay it they would have to take you to court and get a judgement against you to make you repay it.

They would have to adjust the taxes on any repayment so that you could file an amended return and get back the taxes withheld. They would also have to file amended returns on their taxes.

Either that or they subtract the 30% and take the loss.

Shirley