Central Payroll Office Overpayment Processing
There are 2 types of overpayment processing: GROSS or NET adjustments. You should review the overpayment guidelines and tax year restrictions to determine which method is best in each situation. If you have a special situation, before you negotiate, please contact the Payroll Director or Operations Manager for assistance. Please review Payroll Standard Operating Procedure 2.0: Overpayment for additional information.
- Adjustment Voucher: When an employee receives a partial overpayment, ask the campus/department to prepare a paper adjustment voucher reflecting exactly what the employee should have received for the pay period(s) involved.
- Review paycheck data and verify that all check details are correct (any retro adjustments, non-cash fringe, absent hours, etc. must be included).
- If the original check included earnings on multiple record numbers, this information must be included as well.
- Mail, scan and attach, or fax the adjustment voucher to the Overpayment Repayment Coordinator (Deb Doub).
- Adjustment voucher is not necessary for a full payback if the entire payment was unearned; proceed to OVP Email.
- OVP Email: The Central Payroll Office processor should send a message to PRHELP and the Overpayment Coordinators (Lisa Hays and Deb Doub).
- Include the Employee Name and ID in the subject line.
- Include complete details about all checks involved; check date(s), check number(s), NET amount(s).
- Include name of person reporting overpayment to Central Payroll Office.
- Include short description about how/why the overpayment occurred for an audit trail.
- OVP Letter: The Overpayment Repayment Coordinator (Deb Doub) will calculate the NET payback amount and send an emaul to the campus/department with official OVP letter attached.
- The campus/department is responsible for contacting the employee and requesting payback.
- The campus/department may wish to modify the OVP letter including their contact information and share with employee.
- OVP Spreadsheet: When FMS Payroll is notified of overpaid wages, we maintain a detailed spreadsheet by calendar year to monitor the liability to the university.
Overpayment Gross Adjustment Procedures:
When an employee is overpaid, if they still have payments that will be processed and paid in the same tax year, it is always easier to enter an adjustment voucher and subtract the GROSS amount from future pay periods.
- In this situation you are dealing with GROSS amounts. When you enter an adjustment to reduce wages in a future pay period, it also reduces the employee’s taxable gross and they pay less taxes, etc.
- The campus/department should discuss the issue with the employee and also have them sign the Overpayment Acknowledgement & Wage Adjustment Authorization form to withhold from a future payment.
- If all checks paid in the current calendar (tax) year have already been processed, you don’t have the option to reduce future wages. Example: if a monthly employee is overpaid on their Nov 30 paycheck, that was the last payment for the calendar year and the December period is paid in January. You must follow Overpayment Net Payback procedures.
Overpayment Net Payback Procedures
If the employee doesn’t want the money subtracted on the next paycheck and wants to pay it back now by writing a check to IU, FMS Payroll must calculate the NET payback they will owe.
- For partial overpayments, prepare an adjustment voucher indicating exactly what the employee should have received on the payment if everything had been done correctly. You must enter all earn codes broken down by each month (or week for BW/HR). Include ABE hours for S12/S10 employees. Please remember on biweekly earnings that Reg hours should be total hours for the week, benefit hours will subtract from Reg (example: BW employee worked 24 hrs and took 16 VAC. You should record 40 RGN, 16 VAC). Review the paycheck; if an additional pay, non-cash fringe (FCY), attendance corrections including ABE/ABS, prior pay period adjustment (anything!) was on the original paycheck, it must be included on the ovp adjustment voucher. This is important because the original payment will be totally reversed and back out everything.
- FMS Payroll runs a process that will totally REVERSE out the original check and then start over to calculate exactly what the employee should have received for that pay period. The difference in the OLD NET pay and the NEW NET pay is the amount of the payment we need from the employee.
- You will receive an overpayment letter indicating exactly how much is owed, etc.
- This reversal/adjustment process recalculates all wages, taxes, etc. which is why we are dealing with NET pay. The taxes have already been adjusted as part of this calculation using a new taxable gross amount.
- After FMS Payroll determines the NET pay and sends you the amount, you MUST NOT use that amount to subtract the OVP from future payments. If they change their mind and decide they want you to subtract the overpayment from future wages, you must go back to the GROSS amount. Contact Lisa and/or Deb. They will confirm the GROSS amount with you and remove the record from our Overpayment spreadsheet.
PRIOR YEAR Overpayments:
- When we move to a new tax year, any outstanding overpayments will be recalculated to include federal, state and local taxes, TDA, TDA Catch ups, IURETS, and Garnishments. IU has already remitted the taxes on behalf of the employee. The employee has benefit of the tax in their account and may have received a refund so it must be included in the payback. We also have to include social security taxes unless the employee completes the Request for Prior Year Employee Social Security and/or Medicare Tax Correction form.
- If the employee is still working, we may be able to establish an after-tax deduction to collect prior year overpayments. Contact Overpayment Repayment Coordinator (Deb Doub) for assistance.
- Please send an email to PRHELP, Lisa Hays, and Deb Doub with the overpayment details when you send the adjustment voucher. It is helpful if you put the employee ID, name, and department code in the subject line.
- If it is a complete overpayment (the entire check), you only need to send the detailed email. You don’t need to email/fax an adjustment voucher since the employee owes back the NET amount.
- We only accept personal checks, cashier’s checks or money orders for payments. No cash or credit cards.
- The check should be written to IU.
- The check should be forwarded to Overpayment Coordinator (Lisa Hays) for deposit. Do not deposit the check into the departmental account.
- The original payment will not be reversed until the payback is complete.
- You cannot mix payback methods for the same paycheck – you can either enter adjustment vouchers with GROSS amount or request a check for NET amount. If an employee was overpaid on multiple paychecks, you can choose either method per paycheck. Example: you can deduct the gross amount to cover 2 payments and you can have a NET payback calculated for 2 payments. The same method just has to be used for each single paycheck.