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How to Handle Repayment of Prior Year Wages

When an employee repays wages from a prior year, the employer must correct the Social Security and Medicare wages and taxes on a W-2c. However, the federal wages in Box 1 should not be changed, as the employee received that income in the previous year. A Form 941-X must also be filed to adjust the employer's quarterly tax return.

Step-by-Step Instructions

1. Open W2Correction Mate and either create a new company or open an existing one.
2. Click on the W-2C Forms Tab and then click Add W-2C Form.
3. Enter the employee details.
4. In the "Previously reported" column, enter the original Social Security and Medicare wage and tax amounts.
5. In the "Correct information" column, enter the corrected amounts to reflect the repayment.
6. Do not change Box 1.

7. Click Save.
8. To print the employee's copy, select the W-2C Forms tab, select the employee from the list, click Print. In the dialog, select "Copy B—To Be Filed With Employee’s FEDERAL Tax Return".
9. To print the SSA copy, select the W-2C Form tab, select the employee from the list, click Print. In the dialog, select "Copy A—For Social Security Administration".
10. To e-file, select the Summary W-3C Form tab, and click E-File W-2C / W-3C Forms. Fill out information in the dialog, and click the Click here to review the W-3C form button. Click the I have reviewed the W-3C form box. Click OK. Once you create the e-File, you need to upload to the SSA BSO website.
11. File a Form 941-X with the IRS to correct the employer's quarterly tax return.
12. Distribute the corrected W-2c.

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Disclaimer: All tutorials provided are for informational purposes only. Please consult the IRS, your state department of revenue, or a tax professional for official advice and guidance regarding tax matters, including W2 corrections and W-2C filing.