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This is a very frustrating situation as the last employer continues to pay me despite my multiple calls to their helpline to rectify the situation. I've called the HR and Payroll department multiple times and filed reports.
When they ask for money back, it will cost me a lot of time and effort to resolve this as it has screwed up my taxes and retirement accounts etc. What is the advice on how to deal with this? I'm tired of telling them to stop paying me. This is very large corporation.
Whichever account this money is arriving into, stop using it and open another checking account. At the same bank is fine. If you use checks, get new checks. Leave in the account exactly the amount you were overpaid, plus $100.
Let the money sit there, and continue to pile up as they keep paying you. Don't spend it, it is not yours.
At some point they will realize their error, and are likely to attempt a massive withdrawal for the entire overpay amount, or a series of reversals of each paycheck. Make sure these succeed, and the account finishes with nore than $0 in the account (unless you really enjoy bank fees). The bank will not do a merit removal of any bank fees, because they don't want to be involved in the dispute. They will do one courtesy removal if they haven't done any for you lately.
If the reversal of these payments overdraws your account, you will be liable to pay that immediately under pain of ChexSystems blacklisting. The bank is not party to the dispute, and doesn't care. If you think on a cash basis (money in my pocket is mine), that will get you in big big trouble because nobody in the financial industry thinks that way. Effectively you are a trustee of this misdirected money.
Ok. Let's play our cards to make this as likely as possible.
Since you are a party to a contract (the employment contract) you must actively help them correct their mistake. Nothing counts unless it is provable. So sitting on hold waiting for HR helpdesk is unlikely to help you, especially since in a dispute, the company has every incentive to destroy any call logs or evidence you called.*
"Mitigation" requires that you tell them what is happening. However you do not need to give them canoncal facts (which you may not even know**), you simply need to raise the alarm. And I say, "don't give away the store", don't hand them victories.
No notice counts unless it counts legally. What courts recognize is paper. In a perfect world you have your lawyer serve notice; your lawyer can testify that you did send it. In the real world, a certified letter with the pastel green card (not the bright green e-confirm) is what is called for. Write on top of the green card's instructions noting what the card is for, then get the green card back in the mail and hold onto it for dear life. That is your "get out of jail free" card.
Send two: to your company's regular mailing address and also to their legal address, which you can find on your state's corporations database, which is on the web.
The letter should look like this; the important thing is don't claim any facts and don't give away anything.
Company Inc. Payroll / HR department
To whom it may concern,
My name is your name here, and worked at company name here until recently. I quit around date-here, I do not remember the exact date.
I continue to receive my normal paychecks from the company. I do not remember the exact terms of my severance and I do not have that paperwork handy, but I did not expect to be receiving these amounts.
Please check to be sure that I am receiving the appropriate amounts. If any money needs to be returned to the company, please contact me as soon as possible so I may prepare***. Please make sure this does not disrupt my healthcare, 401K, spending plans or my taxes.
Your "duty to notify" is now complete.
Now comes the hard part: waiting. With any luck, the company may just say "to heck with it" and let you keep the money. That is our best hope, but it's not bankable for a long time or unless they flat out tell you that's what they will do. Just forget that checking account even exists.
FICA, the company will need to claw that back from FICA. Not your problem.
With regular taxes, 401k, health savings plan, etc., all those are deposit accounts. Let's suppose they overpaid your 401K by $2000 and your tax withholding by $1000. Both of these options are equivalent as far as the law goes (though the cash flow is different):
The second one is not worse except for the cash flow impacts to you, so it isn't an outrageous ask.
Tax withholding is not tax. It is a deposit into an account the IRS holds for you. It doesn't actually pay your taxes until you file your taxes on April 15.
Now if this involved money last year, and it doesn't get resolved before you file your taxes... Then eventually, they are going to issue you an amended W-2, at least they better.
At that point, you amend your taxes. Get a blank set of tax forms and do your taxes again with the corrected data. Do the whole 1040 just like you did the first time. Then take your old 1040, the one you already filed, and lay them side by side. They will be the same, except a couple places, and the totals, of course.
IRS doesn't want all that. They want you to summarize the changes, in a form called 1040X, where you write in some numbers off your original 1040, some numbers off the new 1040, and the differences. Then you write a note explaining what changed. File that, and either you can ask them to send you a refund, or carry the credit forward to the next tax year, which means you need less withholding.
It is really achievable to file a 1040X, and I do it almost every year. Mind you I am not an H&R Block guy, I do file my own taxes. Because it is so doable, it's really your call whether to wait before filing your taxes, or just go ahead and file right away, get your refund, and then amend with 1040X later. Regardless, you must use the numbers in the W-2 provided, don't "correct" it to what you think it should be because that will instantly pop an audit. Or the IRS will just amend your taxes for you to the W-2 amount, and that will really make it complicated.
You can amend your taxes for up to 3 years after the due date.
After 6 months, if it's a significant sum, you may want to talk to a lawyer at this point. You are interested in the Statute of Limitations as your state's law applies it in this sutuation. It is typically 2-6 years. If they haven't asked for it back by the time the Statute has run, it's yours to keep.
The worst case is they successfully demand the money back 3+ years later, too late to amend your taxes. In that case you'll need tax help.
* they would be in big trouble if they were caught deleting your phone logs after they enter a legal fight with you, that would be destroying evidence. However companies work around this by having a "deletion policy" where they delete everything at some interval, e.g. Keeping phone logs only 30 days or something. That is legal.
** for me in one severance, compensation continued to roll in for several months because those were the terms of the severance (it was a layoff that had been planned a year in advance, this was incentive to continue to be loyal, not steal or vandalize on my way out). Don't accidentally tell them you don't want the severance.
*** They will ignore this request, most likely. Be prepared.
Don’t spend the money. You should put it aside for when you are asked for the money back.
Inform the company that they are still paying you. A registered letter to their company address will be fine. Don’t offer anything. It’s their mess, they can clean it up.
If they paid for health insurance, pension etc. That’s their problem to get the money back. They will probably also pay taxes on your behalf; again it’s their problem to get that money back.
So if they ask for more than your paycheque your answer is no. If they ask for your paycheque back, you call the tax office and enquire how much they think you earned, and if there are problems you sort that out first.
Let’s say you make $5000 a month, you were paid 3 months when you worked elsewhere, and the tax office thinks you made $75000 instead of 60,000. Any extra cost you have is up to your company. So they sort it, or they can’t have all their money back.
In many jurisdictions, employers have the legal right to ask for any overpaid money to be given back. Keep the money they have paid you to one side.
If you have the contact details for your old manager (assuming they still work there), that would be a good place to start. It should trigger an internal investigation as to why HR or Accounts have screwed up so hard, at the very least.
While this may be a pain to do, create a second bank account, transfer all of your funds, minus the errant pay, and keep the first account to hold only the errant transfers so that your funds are not blended.
Contact your local tax office for advice, and continue to pester HR, and CC senior management in the company so that they are made aware.
Truth be told, a friendly call from the taxman may make them move, so please do not skip that step.
The simplest way to avoid "having to pay the money back" is never to receive it.
I assume the payments are electronic transfers, since if they were posting you physical cheques all you have to do is not cash them.
Rather than opening a new account with your bank and getting the payments transferred, just request your bank to block them. Eventually the company will notice something is wrong and stop trying to make the payments. If they have paid advance tax on money that you never received and the tax collection system accepted those payments, that is their problem to sort out with the tax office, not yours.
Contacting a large company's general purpose "helpdesk" over a problem like this is a waste of time. The low-grade employees who man the phones won't have any defined procedure to follow, and they usually have little motivation to do a good job anyway. Their productivity target is to get rid of callers as fast as possible, not figure out how to handle questions where they don't have a pre-scripted answer. Making contact with your former manager or HR rep is more likely to achieve something.
I agree with other answers to not spend it.
As for screwing up your taxes and plans, you should put in your formal claim letter that accounting charges (hiring a professional accountant, transfert fees, ...) will be deduced from the money they sent you before returning it, as it was not your fault.
I am someone who has experienced a very similar issue. I got overpaid £20,000 at my workplace, and I chased the payroll department for 2 years before I got them to even respond to my calls / letters / emails.
The only email that worked was the one that said "My employment is coming to an end and I am about to leave the country". I then received an incredibly rude letter along the lines of "it has just come to our attention that you owe us money and you need to pay asap or there will be consequences".
In the end I lost money over this affair because I had overpaid taxes in various forms because of this overpayment, and clearly it was nothing to do with my employer, I had to claim that tax back from the HMRC directly, a process which took another couple of years in itself of me going back and forth trying to resolve the issue, while trying to liaise with a (now uninterested) ex-payroll department for a paper trail.
I would treat this seriously and go down a legal route. "You are overpaying me money I don't want and it is causing me trouble. Please cease and desist. I have started a legal procedure."
You might even go down the 'administrative charges' route, i.e. "I would also like to inform you that these payments are unsolicited, and administering them costs me time and money. Please be advised that I will be charging an administrative fee for the processing of future payments, at the rate of £250/h". Next time they pay you, send them a bill. Ask your lawyer for advice, but apparently as long as you can prove the letter was received, then this is legit and legally binding. People have used this tactic against unsolicited TV licencing letters.
As for whether it's worth spending money to ask for legal advice, consider that even with whatever tax I managed to get back, I still lost about £1,000 from this story, not counting time, money, and petrol wasted going back and forth for 5 years to settle this business.
Don't spend it until you consult a lawyer with expertise in local law. It might be preferable to spend it ASAP. "Don't spend it" is probably a nice hunch in good spirit, but this is a legal question with high dependence on jurisdiction. I wouldn't listen to internet people regarding this one.
There are jurisdictions where an erroneously awarded gain is a subject to be returned but only if the recipient is able to so do. I believe that this protects an unaware recipient from bearing consequences of spending the money thinking it was rightfully theirs. Especially since an employer can award bonuses. The collateral is that if you want to keep money it's best to spend it before you're called to return it. Opinions are "that's it's practically close to impossible to force employee to return money even if they are still employed. In practice though, it does happen often based on employees' goodwill."
Not very ethical probably, especially since you are aware of the mistake. On the other hand you can't be taxed for it, and keep it frozen; what if they silently refused to stop paying you =).
Consult a lawyer on your options and pick the one that you will feel the best with. Don't blindly think that making second account to keep tabs or acting in good will protect you and your best interest. You need to be sure what should you do.
Keep the money unspent for now, you will be asked to reimburse it.
Send a formal letter to the company with proof of receipt stating the issue and your willingness to pay back the wrongfully transferred money, so that you can prove you didn't actively try to steal money from them. Just to be on the safe side, you could also contact your bank telling them to refuse incoming transfer from your old company.
Close the account so they can't pay anymore into your name. If there is no proof you received the money, I'd say there is no basis for the tax, which means it would be easier to claim it back even should it be taken.
Seek an accountant, and get them to work out all the tax you would have overpaid as a result of that money entering your tax records so far.
Send them this information via email or a letter. Record all calls but try to keep things only in written format where possible.
Also, why not seek help from your previous superiors? It may be possible to do more from the inside.
Let the government organisation responsible for the taxes know that this is happening. They may be able to help you more, it doesn't seem like you'd be the only one facing this. If it happened to you it is happening to somebody else.
Only mentioned on the side in comments is a more worrying scenario than simply sitting on a pile of money not yours, and that is that you may end up being taxed over that money in various ways.
If the company reports the payments to the tax and social security agencies as taxable income you made, those guys are going to demand you pay taxes and social security premiums over it. And when you eventually pay the company back, don't expect the government to give that money back without a fight, if at all.
Ditto with other things they may still be paying for. A health insurance for example, or accident insurance.
I've had to deal with a related but different scenario where a company was in serious arrears paying the company health insurance plan, and the insurance company came after me personally to recover the premiums after 2 years. Expect things like that to come your way, because if their administration is as sloppy as it appears to be it's not unlikely that they for example stopped paying insurance premiums for you but forgot to cancel the insurance policies.
