How to Handle a Salary Overpayment Within a Grant
If you fund your research project using a grant, you may have to use a portion of the grant to pay the wages of those working on the project. When handling the overpayment of wages, you must conform to state laws regarding recouping funds. Most states allow you to recoup wages at a later time. Furthermore, you should allow for the difference in tax brackets that may result from a salary increase.
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Instructions
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Check with your state's department of labor for laws regarding the overpayment of wages. Find out if you must give a period of notice before adjusting employee salaries in the future and for how long. Some states forbid the adjustment of future wages. You should ensure that you are balancing your books legally to avoid any lawsuit in the future.
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Consult the employee who has been overpaid and inform him that you intend to recoup the overpayment from a future paycheck. Some states require employee authorization, while other do not. You should, however, put the notice of overpayment recouping in writing, so you and the employee can file it for future reference.
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Deduct the salary overpayment from a future paycheck. You can calculate this exact amount using the services of a tax accountant. Keep in mind that the employee may have entered a new tax bracket, meaning that you may have to recoup less than the difference in overpayment.
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Consult the grant's issuing body for any tax shortfall. You may end up with a net loss in grant money, as the employee may have entered a new tax bracket with the overpaid salary. Report any loss in grant money to the issuing entity, which may compensate for the loss. As many grants are not taxable, it is often up to the issuing body to file for tax losses with the IRS.
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