University of Illinois System
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Overpayments may occur due to administrative error, job records not ended on time, work schedule/default hours not ended correctly, or data entry and time reporting errors during time entry. Both the employing unit and University Payroll & Benefits (UPB) have responsibilities to resolve overpayment situations pursuant to Business and Finance Policy and/or Internal Revenue Code (Publication 15).

Departmental Responsibility

The employing unit is responsible for notifying the employee of the overpayment. The unit is also responsible for notifying UPB to initiate the recovery process for overpayments by submitting an overpayment adjustment request in the Adjustment Notification Application (ANA) or the Payroll Adjustment Request Interface System (PARIS).

You may use this sample overpayment notification letter to notify employees.

Employing units will be responsible for a service fee for overpayment amounts collected. The following table provides guidelines to resolving overpayments based on the disposition of the payment.

Status of Payment Transaction Adjustment Result
Current pay period, not calculated Current Pay Adjustment (PARIS) N/A Overpayment prevented*
Current pay period, not distributed Pay Stop (ANA) Submit Prior Underpayment Adjustment for correct pay due (PARIS) Overpayment prevented*
Prior pay period Overpayment Adjustment (ANA) N/A Initiate collection process

*These transactions do not result in assessment of the payroll service fee.

If a job record error is the cause of the overpayment, the department representative must submit a  HR Front End (HRFE) transaction as required.

  • Employing units should act as a liaison between UPB and the employee, ensuring that the employee understands the procedures for collection as described below under Overpayment Collection Process.
  • Unit representatives should facilitate contact with UPB Customer Service in order to assist the employee in making repayment arrangements, or to request a review.

When arrangements are agreed upon, the employing unit must inform the employee of possible tax implications. Employing units will receive notification from UPB regarding terms of any arrangements made.

Overpayments Involving Sponsored Projects (Grants)

If an overpayment involves a grant, Federal agriculture, special state appropriations or any other fund that may change or close before recapture, the unit should follow this process:

  1. Transfer the overpaid amount of the Grant to an unrestricted FOAPAL on the Labor Redistribution (PZAREDS) page in Banner.
  2. Wait until the next business day.
  3. Complete the Overpayment Adjustment transaction in ANA, following the instructions in the Overpayment Job Aids
  4. Contact your local Sponsored Programs office if additional assistance is needed.

UPB Responsibility

University Payroll & Benefits processes overpayment adjustments and notifies employees when they enter into repayment arrangements.


It is the responsibility of UPB to process overpayment adjustment transactions following the collection process guideline. In general, each transaction will be processed promptly to ensure collection where possible.

Transaction Processing Deadline
Pay Stop (ANA)** 5 p.m. three days before payday
Current Pay Adjustment (PARIS) See Payroll Schedule
Normally 10 a.m. Wednesday for Bi-weekly scheduled calculation
Overpayment Adjustment (ANA) Day before payday - present

**A pay stop request will stop payment on any active job the employee holds for that pay event.


UPB will use the employee's mailing address (MA) or permanent address (PR) in Banner for all correspondence in reference to overpayments along with an electronic copy via email. The contact person for the employing unit identified in the ANA transaction will receive an electronic copy.

When an employee enters into a repayment arrangement, UPB will notify the unit contact of the terms.

Upon full collection of an overpayment, the employing unit and the employee will receive an "Overpayment Closed Notification" letter.

An overpayments report is available in Mobius View at the beginning of each month providing details on the prior month's overpayment activity.

Overpayment Recovery Process

UPB's  recovery process is determined by:

  • The status of the pay event (disposition of pay event)
  • The status of the employee (active or terminated)
  • The gross amount (less than or greater than 20% of regular gross pay)
  • Whether the overpayment occurred in the current tax year or a previous tax year
    Internal Revenue Code - Publication 15

If an overpayment cannot be prevented and the employee receives the overpaid amount, the employing unit must initiate the overpayment process in ANA and notify the employee of the overpayment. UPB will notify the employee and begin collection activities.

If an overpayment cannot be prevented and the employee does not receive the overpaid amount because the unit does not distribute the payment via a paper check, the employing unit must initiate the overpayment process in ANA and return the original check to UPB with the completed Return Payroll Checks/Overpayment Remittance Form.

Overpayment Service Fee

Units will be charged a 6% payroll service fee for all overpayment amounts recovered. These fees will be assessed monthly on the previous month's collection activity. The fee will be posted to the C-FOAPAL overpaid, or as indicated in the ANA  transaction. The fee will be posted by an automated Journal Voucher (JV) process at the beginning of each month. Current Pay Adjustments (CPA in PARIS) and Pay Stops transactions in ANA will not be assessed in the service fee since these transactions prevent overpayments.

Other posting considerations:

  • Description on JV transaction will be "Payroll Service Fee" and will identify University Identification Number (UIN) and Pay Period
  • To transfer charges to a different FOAPAL, a JV will need to be initiated by the unit
  • Corrections to JV entries related to the payroll service fee will be limited to the current fiscal year only.

Service Fee Appeals Process

  1. Corrections to JV entries related to the payroll service fee will be limited to the current fiscal year only.
  2. The appeal must occur within same fiscal year as the fee.
  3. Customer service representatives can determine if the fee should be refunded.
  4. Option is available to meet with UPB management if agreement cannot be reached with customer service representative.
  5. Meeting will be set up to occur within 30 days of the request (except near the fiscal year end).
  6. Decision regarding the refund will be rendered within 5 business days.
  7. Fee will be refunded/reversed at the end of each month.

Overpayment Process Guide for Units

Need assistance? The Overpayment Process Guide for Units will aid employing units in following the collection process.

Additional Overpayment Situations/Information

  • The University of Illinois System may only adjust the Medicare and/or Social Security taxes, if applicable, for a prior calendar year by issuing Form W-2C, Corrected Wage and Tax Statement. Because the employee received and had use of the funds during that tax year, wages paid in error in a prior year remain taxable to the employee for the year in which they were received.
  • To recover income tax on repaid wages the employee is entitled to either a deduction or credit, depending on the amount repaid, on his/her income tax return in the year the wages were repaid. The employee should not file an amended tax return. UPB will issue a statement of receipt of funds indicating the amount repaid from an overpayment in a previous year. The individual can offset income on his/her tax return in the year in which the repayment was made. The statement of receipt can be used to determine the amount to offset.
  • If an employee is not active because he/she is on leave, lay-off, or has sporadic employment, then the unit may notify payroll of the expected return-to-work date in order to facilitate better recovery results.
  • Workers compensation claims resulting in an overpayment should be reported immediately.
  • When UPB processes the reversal or credit transaction for the overpayment, the full amount for Tax Deferred Annuity (403B) deductions may not be recaptured. When this occurs, UPB will charge departments for any shortages that transpire. Shortages may occur due to market fluctuations that result in a reduced market value for the contribution originally invested.
  • Please notify UPB immediately if you learn an overpaid employee has transferred or recently become active in a different unit/department/org.

Overpayments that span fiscal years

If an overpayment occurs in one fiscal year and the repaid funds are received from the employee in a new fiscal year, the funds will be credited to the department's account for the current fiscal year. Funds on state accounts lapse and will not be credited if received from the employee in a new fiscal year, unless they are received prior to the end of the lapse accounting processing period. The funds will revert to the state if received after the lapse processing period. It is recommended that the unit redistribute the payment to another fund to ensure proper credit when the amount is repaid.

Overpayments that span calendar years

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 a W-2 for the year in which the payment was received. See IRS Publication 15 for more information on wage repayments.