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I was recently inadvertently given two different bonus payments by my employer. Both had taxes, etc withheld. Now (as expected) I've received an email from HR "apologizing" and informing me that I need to do one of the following:

  • Give them a check for the deposited amount of the incorrect bonus (excluding the tax and other withholdings that they will take care of)

  • Have them deduct the amount owed from my next 1-5 paychecks.

The total of the amount owed back (not including withholdings) is only around $3000. Is either way more advantageous than the other? Should I consider something else that I'm not thinking of?

Thanks.

  • How big is the company you work for? (Approximate number of employees.) – TTT Aug 22 '16 at 21:35
  • Multi billion dollar corporation. Thousands of employees. – Argonax Aug 22 '16 at 22:31
  • OK. The reason I asked is because in a larger company it's less likely that your immediate supervisors would know what your decision is (payback immediately vs spread it out). So my sentence "this makes you look the best in the eyes of the your employer" probably doesn't matter as much. – TTT Aug 23 '16 at 14:06
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Assuming you still have all the extra money they gave you, I think the best solution would be for you to pay them back immediately. I think this makes you look the best in the eyes of your employer. Also, if instead you choose to deduct it over the next 5 paychecks, a couple of things might happen:

  1. Since the upcoming paychecks are smaller, their accounting software might withhold less taxes than they should. (They could take manual action to prevent this, but you don't know for sure that they will.)
  2. You could feel like you're working hard for less money. This is purely psychological, but for many people their net take home amount gets mentally associated with how much work they put in to receive it. As an example, imagine if you were paid your entire year's pay minus $52 on January 1st. Then you received $1/week for the rest of the year. Even though you know you owe them the work, it would be a lot harder to get out of bed every day and go to work all week for just $1.

That being said, you are essentially being offered an interest free loan from your employer. Just make sure that if you choose to accept the loan that you don't go on a spending spree that makes your reduced income for the upcoming months harder to deal with.

  • Thanks very much for the input. I'm just concerned that they'll consider it income at the end of the year and that I'll have to file extra tax paperwork to show that I paid it back to the company as reimbursement and didn't get it as earned income. – Argonax Aug 24 '16 at 0:55
  • Since HR is asking you to pay it back, I think it's reasonable to assume that they won't forget to deduct it from your earnings once you do. Furthermore, each pay stub you receive should show your YTD on it, and presumably it increased by the amount of your bonus already. Once you pay it back you should see the YTD decrease by the amount you paid back (less the amount of your current paycheck). If it doesn't decrease you should be able to detect it long before you receive your W2 (or similar if you're not in the US). – TTT Aug 24 '16 at 5:13

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