A recent episode of “The Ramsey Show” sparked frustration and sympathy after a caller revealed she was accidentally overpaid $48,000 by her employer—and now, nearly a year later, the company wants the full amount returned.
Rachel from Nashville said she and her husband had taken Dave Ramsey‘s course last fall and were making major progress paying down debt. But in October, her large corporate employer made a huge payroll error, mistakenly paying her $48,000 in gross income she wasn't owed.
Don't Miss:
- 7,000+ investors have joined Timeplast's mission to eliminate microplastics—now it's your turn to invest in the future of sustainable plastic before time runs out.
- $100k+ in investable assets? Match with a fiduciary advisor for free to learn how you can maximize your retirement and save on taxes – no cost, no obligation.
The conversation that followed was somewhat confusing for both the hosts and the caller, as they tried to sort through the tangled details. One YouTube viewer summed up the chaotic conversation with a comment that captured the mood: “This conversation was worse than a tooth extraction.”
Tax Confusion And Delays Made It Worse
“I told them before it hit my bank account,” she explained. “Unfortunately, it was too far gone at that point.”
She said the net amount she received was $28,000 after taxes. Only about $3,300 of that was her actual paycheck. And even though she flagged the mistake immediately, it took the company 10 months to send her a repayment letter.
Trending: Accredited Investors: Grab Pre-IPO Shares of the AI Company Powering Hasbro, Sephora & MGM—Just $0.63 Before NASDAQ Launch
Because the issue crossed into a new tax year, the employer is now asking her to repay the full gross amount, including $23,000 in taxes that were already sent to the IRS.
“It was taxed in my 2024 tax return,” she said, adding that the tax hit came out of pocket. To make things more confusing, the employer is offering to deduct 15% of her future paychecks until the debt is repaid.
Ramsey broke it down directly: “You don't pay more than what you actually owe.”
He explained that she should only repay what she physically received – about $24,000, after accounting for her real paycheck – and the rest should come back from the IRS once her taxes are corrected.
“You paid $23,000 more in taxes than you should have,” Ramsey said. “You should get all of that back.”
See Also: Warren Buffett once said, "If you don't find a way to make money while you sleep, you will work until you die." Here’s how you can earn passive income with just $10.
The IRS Will Likely Have To Return The Tax Overpayment
Ramsey told her to have the company file an amended W-2 and to make sure her tax preparer files an amended return, so she can recover the $23,000 she never should have paid.
“If your CPA doesn’t know how to do that, get a new CPA,” he said. “This is not rocket science.”
Co-host Ken Coleman criticized the company for taking so long to fix its mistake: “A big company that has all the resources in the world to fix this, and they didn’t fix it quickly. Hate that for her, but it is fixable.”
Ramsey said that in his own business, if they accidentally overpay someone a few thousand dollars, they often just let it go. “You know what we do? Eat it. Just keep the money. We’re so stupid. We did this. We’re going to pay the stupid tax and we’re going to fix it. “
Read Next: Many are using retirement income calculators to check if they’re on pace — here’s a breakdown on what’s behind this formula.
Image: Shutterstock
