How do I rectify an overpayment on my taxes as a result of an overpayment from Cornell?
Date: June 2021
I was contacted last fall by my department to say that that one of my paychecks had been an overpayment. I was given no information about the paycheck they were specifically referring to but was told someone from payroll would contact me to discuss how I was to repay the overpaid amount. I never heard from anyone in payroll, so I assumed the message had been sent in error, and all was well. I was, unfortunately, incorrect.
I received an email in March 2020 (about seven months later) about the overpayment, saying I owed ~$1,000 for the overpayment from a paycheck last August. I completely agree this money should be returned to Cornell since it was given to me out of error. However, given the large sum of money, I asked to speak with someone in payroll to ensure I understood everything correctly and ask a few questions regarding how this overpayment would affect my income on my taxes.
Upon speaking with an employee from payroll, I raised my concerns that the overpayment of $1,000 had been reported on my W2, which increased my taxable income and the amount I had to pay to the IRS in taxes. I had done the math for taxes owed in both situations (with and without the extra $1,000 on my W2). With the amount reported on my W2 (which included the $1,000 overpayment), I ended up paying an extra $100 dollars in taxes. In trying to explain to the payroll staff person why I had overpaid in taxes, she told me that Cornell couldn’t offer any tax advice. I was not asking for tax advice, I was asking for a corrected W2, which Cornell can give.
I am extremely lucky and privileged to have funding. However, this is still a substantial sum of money to repay. I acknowledge that Cornell should be repaid the $1,000 overpayment. At this point, I would appreciate any guidance on how to rectify the overpayment of $100 in taxes. Additionally, I sincerely hope that no other graduate student has to go through this headache. I’m not sure how to prevent this from happening to another student, whether it is what happened on Cornell’s side that resulted in the overpayment or a more helpful approach to addressing students’ concerns. Either way, I hope something can be done to help any other students who might find themselves in this situation.
Overpaid and Overtaxed
Dear “Overpaid and Overtaxed,”
I’m really sorry to hear of this situation. Because graduate students sometimes receive funding from different departments or units within an academic year, and last minute funding changes occasionally occur, overpayments of graduate assistantship stipends can happen when there is a miscommunication or error made on the start or end date of an appointment. For example, a summer GRA appointment might be extended into the fall term because the department didn’t know that a student was planning to switch to fellowship or TA funding. These situations are usually sorted out quickly, but if the overlap isn’t recognized until after the first stipend check has been processed the student will need to return the overpayment. It sounds like your situation was additionally complicated because the time that elapsed between the payment and when you received the detailed follow-up information from the payroll office. If the overpayment was returned within the 2020 tax year there would have been no additional tax liability.
I reached out to the Payroll and Tax Services Executive Director, John Harabedian, to talk about this situation. He explained that W2 forms are an official tax document so Cornell doesn’t have much discretion in printing them. They must reflect the payment activity in the calendar/tax year. If an overpayment is resolved in the following tax year it will be reflected in that year’s W2. In this case, you can expect your overpayment to be reflected on your 2021 W2 as long as you return the funds before December 31st. That will cause your 2021 taxable to be adjusted downwards and should offset the ~$100 in additional taxes you paid in 2020.
It is true that Cornell staff cannot offer tax advice or guidance to students but there are other resources in the community that can be helpful. Alternatives Federal Credit Union offers free tax prep help for income-qualified community members. These websites can also be helpful:
- Graduate School Tax info
- Cornell Tax office
- Cornell Office of Global Learning Tax info for international students
- IRS guidance for students
Again, I’m sorry to hear that this frustrating situation was not resolved more quickly.
Associate Dean for Administration