This model letter as a legally approved form for a client to use when informing an employee about correcting a wage overpayment. Overpayments are considered paid when received and must be included in the employee's income when received.2. Deductions for overpayments are limited to 12.5 percent of the gross wages (provided the deduction does not reduce wages below the minimum wage rate). The salary overpayment resulted because . We inform people about the fact and amount of the overpayment, their right to appeal, and the options to repay or, in some cases, receive waivers for the debt. In the event I leave employment with this agency, I authorize the overpayment balance to be deducted from my final payroll payment or terminal leave cashout. Write a letter to the Social Security Administration. Tell them how much you can afford to pay each month. When To Complete This Form.