Handling Payroll Overpayments Correctly (Latest Version)

This webinar will review the wage and hour laws of several states and the factors that they use to determine if an overpayment can be recouped.

We will examine the FLSA requirements on recouping overpayments including the 1998 opinion letter that spells out these requirements.

We will also discuss the private letter ruling that governs the IRS requirements as well as how to conduct research to determine the state’s requirements for handling overpayments.

Background:

Employees can be overpaid in even the most well managed payroll department.  Yes it does happen when mistakes are made 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 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 first questions that usually arise relate to IRS regulations.  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? We will discuss these regulations and more including the private letter ruling that governs the IRS requirements.            

But recouping overpayments is much more complex than just adhering to 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 over payment 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 individual state may have their own compliance issues involving wage and hour laws!  Is there 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?

In this program we will cover:

Handling Overpayments under IRS and State Tax Codes:

• Why a 1990 IRS Private Letter Ruling on handling overpayments applies 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 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 its effect on minimum wage and overtime requirements
• Can employers treat advanced vacation payments as overpayments if an employee terminates
• Where do the states stand on recouping overpayments

Who will Benefit:

• Payroll Professionals
• Human Resources
• Accounting Personnel
• Business Owners
• Lawmakers
• Attorneys, or any individual or entity that must deal with the complexities and technicalities of multistate taxation within the payroll process

Vicki M. Lambert, CPP

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 www.thepayrolladvisor.com offers a payroll news service which keeps payroll professionals up-to-date on the latest rules and regulations.

With over 35 years of hands-on experience in all facets of payroll functions as well as over 20 years as a trainer and author, Ms. Lambert has become the most sought-after and respected voice in the practice and management of payroll issues.  She has conducted open market training seminars on payroll issues across the United States that have been attended by executives and professionals from some of the most prestigious firms in business today.

A pioneer in electronic and online education, Ms. Lambert produces and presents payroll related audio seminars, webinars and webcasts for clients, APA chapters and business groups throughout the country. Ms. Lambert is an adjunct faculty member at Brandman University in Southern California and is the creator of and instructor for their Practical Payroll Online program, which is approved for recertification hours by the APA. She is also the Program Developer, Subject Matter Expert (SME), and Facilitator for the Certificate in Payroll Practice and Management Program offered by Cengage Learning / Ed2Go through hundreds of colleges and universities across the country.