Payroll refund for prior year and corrected W-2

sriman-shivakoti

We need to refund a pretax deduction for a prior year and then have the system create a corrected W-2.

Does anyone have a procedure you can share with me?

I would appreciate it.

Thanks.

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Comments

Who does your taxes?

We do.

If you get procedures on how to do this I would greatly appreciate the documentation. ccburt@gundersenhealth.org Thanks in advance.

unknown

You can do a PR82 adjustment refunding the prior year pre-tax deduction in that year offset by a Misc. deduction (or a clearing deduction going to the payroll suspense account) and making the applicable taxable income adjustments. Then do a negative Misc. deduction in the current year for the amount of the refund. Then create the W2c for the prior year.

unknown

For prior year refund setup a pay code to refund since they are receiving the money this year. Refund charge the account the specific for the deduction. No W2c involved.

sriman-shivakoti

Our accountant says it requires a W2c since the refund is for a prior year and it affects taxes and taxable wages.

unknown

The question is when did they receive the refund? This year or last year. Taxable in the year it was paid. Section 125?

marty

We handle small amounts like jphillips. A paid refund in a current year is taxable in the current year. If it were a very large amount, we would consider a correction.

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