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? Vicki 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.  In this presentation Vicky Lambert will examine the FLSA requirements on recouping overpayments including the 1998 opinion letter that spells out these requirements.

 

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 session, Vicki will discuss how to conduct research to determine the state’s requirements for handling overpayments. She will also review the wage and hour laws of several states and the factors that they use to determine if an overpayment can be recouped. 

 

Handling Overpayments under IRS and State Tax Codes:
 

Who will Benefit: All those responsible for correcting overpayments made to employees: