Q: I was overpaid by my employer, the DOD, and ended up losing $7k that I was told would come back through taxes. It didn't
I work for Hill AFB and I have a rather interesting problem that I am not sure how to resolve. My problem is not with the IRS but with DFAS (Defense Finance and Accounting Service).
When I started working for Hill, in 2017, I was guaranteed an 11k bonus. I received this bonus. The problem is that, due to a paperwork error by DFAS I received a second bonus of the same amount. Lots of details later DFAS created a debt that I have slowly repaid and I have lost around $7k in total to this and apparently will not be getting anything back.
Essentially, I lost $7k because of a clerical error and have been told that I will receive no more help getting any of it back.
EDIT:
2017
1st bonus: 11K received 7K
2nd bonus: 11K received 7K
2018
Paid back all 7K I received from second bonus.
Received 1.5K fine because W-2 showed I made 11K more than I did.
Had to pay back 4.5K in debt because they couldn't get back taxes of 2nd bonus.
Total of fines/money lost 6-7K
A: You said you received $11,000, as promised. Then you said you received another bonus--without telling us how much. Bottom line: If you received a second bonus you did not deserve (under your employment contract) then you must repay it.
A: Read IRS publication 525. On page 34 it discussed claim of right repayments. Review this section to see if you are eligible for a deduction or a credit. It can be complicated and it may be beneficial to have an accountant prepare your return if you believe you are eligible.
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