Expect it to be clawed back at any time. Stop using the account.
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.
I want to keep it, though
Ok. Let's play our cards to make this as likely as possible.
You have a duty to mitigate damages
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.
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.
Taxes, 401K, health savings plan, etc.
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 old company claws back those payments from the IRS, brokerage, bank, etc. and then you earn new money with your new employer and pay that same amount into those deposit accounts.
- They do not claw back those payments from IRS, brokerage, bank etc., ask you to reimburse the $3000 to the old company, then you reduce your new employer's contribution to those funds by $2000 and $1000, giving you that much more in net cash.
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.
What if it crosses tax years?
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.
If they never ask for the money back
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.