Purpose:

The purpose of this bulletin is to notify agencies of the 2024, year-end processing schedule for AC230s, Worksheet for Paycheck Reversal.

Background:

To maintain the efficiency of AC230 processing and ensure accuracy of W-2 reporting for 2024, agencies must submit AC230s to OSC in accordance with bulletin 2272 and the processing schedule outlined in this bulletin.

As part of OSC’s annual uncashed payroll check outreach, any paychecks issued in 2023 that are not cashed, reversed, or reissued will be turned over to the Office of Unclaimed Funds in April 2025. Outreach to employees with uncashed paychecks issued in 2023 is underway.

Processing Dates:

AC230s and accompanied funds for paychecks issued on or prior to the issue date of this bulletin are due immediately. 

Due to the limited time to audit and process AC230s, checks or check stop payment requests with accompanying AC230s not received by the above listed deadlines may not be processed in time to be reflected on the employee’s 2024 W-2 (Wage and Tax Statement).

Per payroll bulletin 2272, for any AC230 that remains outstanding for more than 30 days, OSC will reissue the funds to the employee through the Statewide Financial System (SFS). Agencies can track their outstanding AC230s on a new tab OSC has added to the Payroll Check Notification Report, found on the PayServ Bulletin Board. This new tab details all AC230 requests for which OSC is holding funds and the number of days the AC230 remains outstanding to ensure that the corresponding paperwork is submitted timely. 

Processing Rules for Returning Checks:

In accordance with the instructions for AC230 processing, agencies are reminded that payroll checks must not be held or returned to OSC if either of the following situations apply:

• The employee is still actively employed by any State agency.
• The employee is due any regular and/or lump sum payments that are equal to or exceed the amount to be returned.

Agencies must email the Payroll Reversal and Exchange mailbox to obtain prior approval to submit an AC230 for a situation that warrants making an exception to the above.

Impact on Employee Form W-2 Reporting

The IRS considers overpayments for 2024, returned in the same year, to be income in 2024 for reporting purposes because the employee had use of the funds (constructive receipt). As a result, when an AC230 is received after the December 31, 2024 (Inst) or January 2, 2025 (Admin) deadline, the employee is due a corrected wage statement (Form W-2C). However, the Federal, State, and Local withholding wage and tax balances for 2024 will not be reduced.

Impact on Recovery of Taxes

OSC has no ability to recover taxes for salary refunds that were originally paid in a prior year.

OSC Actions:

OSC must issue a “corrected” Form W-2 (Form W-2C) for 2024 if an AC230 is received after the December 31, 2024 (Inst) or January 2, 2025 (Admin)deadline. Federal, State, and Local withholding wages and taxes will not be reduced. Only Social Security and Medicare wage and taxes will be updated to reflect the return of the funds and a credit letter sent to the employee by OSC. Credit letters are issued during year end processing as indicated in the Agency Actions chart below.

Agency Actions:

Agencies must be diligent in their efforts to submit AC230s timely. The NPAY539 (Non-Negotiated Payroll Checks) Control-D report, as described in Payroll Bulletin No. 1786 (Non-Negotiated and/or Undeliverable New York State Payroll Checks), allows agencies to identify outstanding checks and take appropriate action.

Agencies should review the Awaiting AC230 tab for their outstanding AC230s approaching 30 days late and submit any outstanding AC230s to the Payroll Reversal and Exchange mailbox immediately. If it is later determined that the employee is entitled to the funds a notification must be sent to OSC immediately so a paycheck reissue can be processed as soon as possible.

Prior to submitting an AC230 to OSC, agencies must review any existing overpayment Earnings Codes that have been created in the employee’s Additional Pay record. Agencies should contact their Payroll Auditor to determine if deleting, end dating, or adjusting the overpayment Earnings Code is necessary to prevent duplicate recovery of the overpayment.

Please refer to the table below to determine whether to include Federal, State, and Local taxes on the Form AC230:

* Taxes should be included in the check as gross wages and employee will receive a corrected W-2 and/or Credit Letter.

Questions:

Questions regarding AC230s may be directed to the Payroll Reversal and Exchange mailbox.

Questions regarding Tax implications may be directed to the Tax and Compliance mailbox.