pestering by me to get information on how to pay the money back, they finally emailed me a "bill" 3 months after I originally alerted them to the problem. I paid the overpayment back the day after receiving the bill. Turns out, no corrected W2 in my future. As a federal employee (former), the IRS says that since I had access to that money in 2020 and didn't pay it back until 2021, it was taxable income. I am not eligible to file an amended return after I file my 2020 return. I can possibly get some money back with a deduction or credit on my 2021 return, so in a year. I did the math, and it cost me about 200 in refund money. I doubt I'll ever get it back since I've never had enough deductions to win out over the standard deduction.

What I learned from this experience... I shouldn't have tried to do the right thing by telling them they had paid me in error. Even with me giving them a heads up, it took them 3 months to ask for their money back. If I hadn't told them, it may have taken them 6 months or more. I could have slid the money into something safe that would generate a minimal return and I at least could have possibly recouped what I paid in taxes. In my case, they told me specifically not to touch the money because a request was imminent for its repayment (this was in early November and they didn't give repayment instructions until the end of January).

Oh, and I also learned not to take advice from people in HR, Embassy accounting, or payroll. It was HR that said that I would be contacted in November... never happened. It was Embassy accounting that said I could just report a lower income than my W2 and then explain later to the IRS... false and who wants to talk to the IRS? It was payroll that said that I would get a corrected W2 and then told me a couple of weeks later that I couldn't file an amended return and would not get an corrected W2... huh?

Only you wise Lounge Lizards came close to giving me proper advice. Have a drink in toast of your wisdom. :-)