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Date:September 16, 2008
Bulletin Number: 837
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Subject

Change in Processing Form W-2c (Corrected Wage and Tax Statement) and Issuance of Credit Statements


Purpose

To advise agencies of the change in providing corrected wage information to employees.

 

Affected Employees

Employees who repay wages that were paid in error in a prior year through an
AC 230.

Effective Date(s)

Immediately.

Background

Pursuant to IRS Rules and Regulations, when an employee repays an employer for wages received in error in a prior year, those wages remain subject to Federal income tax  for that year.*  A Form W-2c for the prior year must be issued but the amount of Wages, Tips and Other Compensation (Box 1) is not to be adjusted.  Social Security and Medicare Wages (Boxes 3 and 5) will be decreased to reflect this repayment.

The amount repaid for wages from a prior year, submitted through an AC 230, will not result in a reduction of the Federal wages reported in Box 1 of the W-2 that will be issued in the current year. A Credit Statement will be issued to the employee for use in filing their current year Federal income tax return.

*Rare exceptions may apply.

Note:  Prior year repayments that are collected through the OVP process are not covered by this bulletin.   Additional information will be provided in a future bulletin.

 

OSC Actions

To ensure proper reporting of corrected wage information, OSC will issue Form
W-2c and provide a Credit Statement directly to the employee.

  • Form W-2c.  Box 1 (Wages, Tips and Other Compensation) will not be reduced.

OSC will adjust the following boxes:

      • Box 3 – Social Security Wages
      • Box 4 – Social Security Tax Withheld
      • Box 5 – Medicare Wages
      • Box 6 – Medicare Tax Withheld

The Form W-2c will be mailed to the employee, according to the monthly processing schedule for Form W-2cs.  Please refer to Payroll Bulletin No. 831 (Monthly Processing of Form W-2c (Corrected Wage & Tax Statement) issued on July 25, 2008 for more information.

  • A Credit Statement will be issued informing the employee of the repaid amount.  The Credit Statement will be mailed directly to the employee at the address in PayServ.  The Statement will be mailed on or before February 2, 2009 as part of Year-End Processing.

 

Agency Actions

Agencies should continue to use Form AC 230 to return wages.   If the repayment is for wages received in a prior year, a Form W-2c will be provided to the employee.  Agencies are no longer required to submit an AC 2674 (W-2c Correction Worksheet) to initiate this process.  The AC 230 contains all necessary information in order for OSC to prepare the Form W-2c and the Credit Statement.

 

Questions Any questions regarding this bulletin should be submitted to the Payroll Deductions mailbox.