STATE OF CONNECTICUT
THE STATE COMPTROLLER
55 ELM STREET
HARTFORD, CONNECTICUT 06106-1775
MEMORANDUM NO. 2001-19
March 16, 2001
TO THE HEADS OF ALL STATE AGENCIES
Chief Administrative and Fiscal Officers, Business
Managers, and Payroll and Personnel Officers
||Reporting the Repayment of Wages from Employees
The purpose of this memorandum is to remind agencies of the necessity of
notifying the Payroll Services Division when an employee makes a repayment of
In accordance with Internal Revenue Service (IRS) Publication 15, Circular E,
Employer's Tax Guide.
III. AGENCY RESPONSIBILITIES
Agencies must provide proper documentation to the Payroll Services Division
promptly upon the repayment by an employee of an overpayment of wages. This will
assist the Payroll Services Division with their reporting responsibilities.
In addition, agencies must provide a statement to an employee
making a repayment of prior year wages showing the amount of repayment, the date
repaid and for what year the amount was included on the W-2. Agencies must send
a copy of this statement to the Payroll Services Division.
IV. PAYROLL SERVICES REPORTING RESPONSIBILITIES
A. Repayment of Current Year Wages
- For repayments of wages paid during a prior quarter in the current year,
the Payroll Services Division will report the adjustments on Form 941 to
recover income tax withholding and Social Security and Medicare taxes. The
Payroll Services Division will report the adjustments on Form 941 for the
quarter during which the repayment occurred.
B. Repayment of Prior Year Wages
- For repayments of wages paid during a prior year, the Payroll Services
Division will report the adjustment on Form 941 for the quarter during which
the repayment was made to recover Social Security and Medicare taxes. An
adjustment will not be made for income tax withholding because the wages
were paid during the prior year.
- The Payroll Services Division will file Forms W-2c and W-3c with the
Social Security Administration to correct Social Security and Medicare wages
and taxes. The Payroll Services Division will not be correcting wages in
box 1 on Form W-2c or income tax withholding for the amount paid in error. The
Payroll Services Division will provide a copy of the W-2c to the employee.
- NOTE: Wages paid in error in a prior year remain taxable to the
employee for that year. This is because the employee received and had use of
those funds during that year. The employee is not entitled to file an
amended return (Form 1040X) to recover the income tax on these wages.
However, the employee is entitled to a deduction (or credit) for the repaid
wages on his or her income tax return for the year of repayment. Employees
should be directed to IRS Publication 525, "Taxable and Nontaxable
Income", for information on how to claim the deduction or credit.
Publication 525 can be accessed on the IRS website www.irs.gov,
ordered by calling the IRS forms number 1-800-829-3676, or picked up at an
Please direct all questions or requests for assistance regarding this
memorandum to the Comptroller's Payroll Services Division at (860) 702-3456.
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