Overpayment Collection
Occasionally, errors in payroll can lead to overpayments being made to the biweekly or monthly wages of employees. Repayment of all wage overpayments will be pursued, and repayment is expected in full. Federal law treats wage overpayments the same as any other wages the employee might have received.
Overpayments can be identified by the employee, their local payroll center or HR-Payroll. Please contact your Employment Center if you have identified an overpayment.
- Once an overpayment has been identified, it is important to immediately repay it or follow a repayment plan recommended by your Employment Center .
- The local Employment Center and HR-Payroll will review all pay-related information related to the overpayment. HR-Payroll can provide a “was paid/should have been paid” worksheet.
Current Calendar Year Repayment
If repayment is made in the same calendar year as the overpayment, the employee will repay the net pay amount of the overpayment. The Payroll Department will reduce the employee’s taxable wages and associated taxes for that calendar year to ensure the year-end W-2 Form is correct.
Repayment Crossing Calendar Years
Repaying in a year following when the overpayment occurred, gross pay must be repaid to the University, per IRS regulations.
- Once the overpayment is recovered in full, the Tax Department will provide a W2c for Social Security
and Medicare wages and taxes only. - For further tax information or discussion, consult a personal tax advisor or review information at irs.gov.
Frequently Asked Questions
Please review the following Frequently Asked Questions. Your payroll center can offer further guidance or involve Central HR and Payroll, when needed.
Yes. Per federal guidelines and payroll laws, the University is only responsible for paying wages earned or services rendered. Any overpayment must be repaid. Employees are responsible for contacting the local Employment Center with questions concerning the payment amount when overpayment is suspected. Overpayments are often identified by payroll centers and HR-Payroll when reviewing reports and validating account balances.
A suggested best practice is to not spend the amount of the potential overpayment. If an overpayment is confirmed, it will be easier to repay.
Purdue offers options for repayment. The easiest and preferred repayment method is often a payroll deduction plan. However with approval, employees may be billed through the University Receivables and Collection Office (URCO). This would allow for credit card payments and other longer payment plans.
If an employee does not create a payment plan with the Employment Center or HR-Payroll within 30 business days of notification, Purdue will bill the overpayment amount through URCO. Students could be encumbered if repayment is not made to the University.
Due to remote employees residing and working in multiple states, Purdue strives to remain consistent in treatment of repayment options. Therefore, Purdue’s practice is to have employee consent to payroll deductions. The employee may authorize Purdue to payroll deduct an amount that exceeds 25 percent of disposable income through a payroll deduction plan.
Yes, the guidelines created by the National Automated Clearing House Association (which manages electronic payments) permit the employer to reverse a direct deposit within five business days. Reversing of direct deposit payments are only allowable if no wages were owed for the entire period. Once five business days pass, the employer is no longer allowed to reverse the direct deposit.
Common questions related to payment options:
- When utilizing a payroll deduction agreement, deductions in the same tax calendar year as the overpayment will reduce applicable taxable wages; therefore, taxes will be reduced. As stated above, payroll deductions that cross into the next calendar year will be post-tax.
- When crossing years, keep in mind the following:
- Once the overpayment is recovered in full, for Social Security and Medicare taxes, the Tax Department will provide a W2c for Social Security and Medicare wages and taxes only.
- For further tax information or discussion, consult a personal tax advisor or review information at irs.gov.
- When crossing years, keep in mind the following:
- When working with URCO, the NET pay is submitted to URCO from Payroll and then URCO creates the invoice. If payment is not received by December 31st of the tax year which the overpayment occurred in, a gross up amount will be submitted to URCO in January of the next tax year.
- It is always best to repay within the same year as the overpayment.
- This allows Purdue to adjust the W-2 so there will not be tax liability on those wages that have been repaid. Repaying through payroll deduction agreement or writing a check to Purdue within the requiredtimeframe allows taxes to be adjusted accordingly.
- Most payments made through URCO will only have Social Security and Medicare taxes adjusted.Federal, state and county income tax will be adjusted when filing the personal tax return.
- Repaying in the same year, avoids a W2c needed for adjusting Social Security and Medicare wages andtaxes.
- Repaying in a year following when the overpayment occurred, gross pay must be repaid to the University, perIRS regulations.
- Once the overpayment is recovered in full, the Tax Department will provide a W2c for Social Securityand Medicare wages and taxes only.
- For further tax information or discussion, consult a personal tax advisor or review information at irs.gov.