Overpayment Recovery Process

UPB utilizes the appropriate method to recover overpayments.

The overpayment recovery process is determined by:

• The status of the pay event as related to the payroll calculation
• The status of the employee (active or terminated)
• The gross amount overpaid
• Whether the overpayment occurred in the current tax year or a previous tax year Internal Revenue Code – Publication 15
• Repayment inactivity

Status of the pay event

Whenever possible the unit should attempt to prevent the overpayment amount from reaching the hands of the employee. A CPA in PARIS during the Current Pay Adjustment Window or a Pay Stop in ANA avoids the need to recover an overpayment directly from the employee. If a paper check is being held by the unit, do not distribute it to the employee. In this situation the employing unit must initiate the overpayment process in ANA and return the original check to UPB within two business days accompanied by the completed Return Payroll Checks/Overpayment Remittance Form.

If the unit does not take the steps required to prevent the overpayment, an overpayment transaction in ANA is the only option to resolve the payroll overpayment. UPB will initiate the recovery process upon receipt of the Overpayment Adjustment transaction in ANA.

Status of the employee

For employees who are active with the university and are receiving regular payments, UPB will attempt to recapture the overpayment amount on upcoming pay events until fully recovered. See Gross Amount Overpaid below.

If the overpaid individual is not currently being paid by the university, they must submit payment to UPB Customer Service. See Repaying Payroll Overpayments - Guide for Employees for more information.

Gross Amount Overpaid

• If the gross overpayment amount is 20% or less of the regular gross pay, UPB will collect the overpayment amount from the next available pay event or adjustment. When UPB recaptures the overpayment in full, the unit and employee will receive an Overpayment Closed notification.
• If the gross overpayment amount is more than 20% of the regular gross pay, UPB will collect the overpayment amount from the next available pay event or adjustment after the deadline on the Overpayment Notification. When UPB recaptures the overpayment in full, the unit and employee will receive an Overpayment Closed notification

If the employee requests to repay the overpayment directly to UPB in full, the employee must request the net amount owed by contacting UPB Customer Service. See Repaying Payroll Overpayments - Guide for Employees for more information.

Tax Year of the Overpayment

The employee was overpaid in the current calendar year:

• If an active employee’s entire overpayment can be recaptured in the current calendar year, UPB will reduce the gross wages on upcoming pay events until full payment has been collected.
• If the overpayment cannot be recaptured in the current calendar year, UPB will credit the departmental expense account for recoverable deductions withheld. The employee's W-2 record will be appropriately adjusted as defined by IRS Code. UPB will set up a payroll recapture deduction (MPP) to recapture the net amount owed. Inactive employees will need to submit payment to UPB Customer Service. See Repaying Payroll Overpayments - Guide for Employees for more information

The employee was overpaid in a previous calendar year:

• The Internal Revenue Service (IRS) has defined the calendar year (January 1 through December 31) as the reporting period for which salary and wage payments are reported on Form W-2. The IRS has defined the method of constructive receipt to determine which calendar year a payment is reported in. If salary and wage payments are available to employees any time during the calendar year, the payments are considered paid in that year and reportable on Form W-2 for that calendar year. If a repaid amount is received in a subsequent year, UPB cannot adjust the wages on Form W-2 for the year in which the payment was received. because Wages paid in error in a prior year remain taxable to the employee for the year in which they were received. See IRS Publication 15 for more information on wage repayments.
• UPB will credit the departmental expense account for recoverable deductions withheld.
• When FICA (Medicare and Social Security) taxes are recovered from a prior calendar year, UPB will issue Form W-2C, Corrected Wage and Tax Statement.
• UPB will issue a statement of receipt of funds indicating the amount repaid from an overpayment in a previous tax year. Consult a tax professional for information about how to file with an overpayment repayment adjustment. See IRS Publication 15.

Repayment Inactivity

• UPB identifies overpayments with no repayment activity within the past 90 days. These are entered as a General Accounts Receivable in Banner at the beginning of each month for processing by the University Bursar.
• University Bursar will attempt to contact the individual by sending two letters and making phone calls in an effort to recover the overpayment owed.
• If no response is received from the employee after 90 days of attempted contact by the Bursar, the debt is sent to the Illinois State Comptroller for collection.