US taxes and refunding/returning payment
Get the worker put it in writing, and deduct it in December under constructive receipt rules. The fact that you're getting the actual cash in January isn't significant as long as you've secured the payment. Verify this with a tax adviser, but that's what I would do.
Your calculations look correct in that they will be withholding taxes at the full year income rate even though you will only have 1/3 of that income which will put you in a lower tax bracket. There are online sites where you can fill out a return for free.  You can estimate your return by filling out a return using the numbers on your paystub (you will have to add in your last paystub manually). In regards to when you will get your refund check?  I believe it comes within a month or so of filing. Yes, you have to file a tax return in Canada.  Non residents that have earned employment income in Canada are required to file a Canadian personal income tax return. Usually, your employer will have deducted sufficient taxes from your pay-cheques, resulting in a tax refund upon filing your Canadian tax return. You will also receive a tax credit on your US tax return for taxes paid in Canada. There are penalties for failure to file and penalties for failure to pay tax.  The penalties for both are based on the amount of tax due.  So you would owe % penalties of zero, otherwise meaning no penalties at all. The IRS on late 1040 penalties: Here are eight important points about penalties for filing or paying late. A failure-to-file penalty may apply if you did not file by the tax filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owe by the tax filing deadline. The failure-to-file penalty is generally more than the failure-to-pay penalty. You should file your tax return on time each year, even if you’re not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should  explore other payment options such as getting a loan or making an installment agreement to make payments. The IRS will work with you. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date. If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date. If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time. If the IRS owes you a refund, April 15 isn't much of a deadline. I suppose the real deadline is April 15, three years later - that's when the IRS keeps your refund and it becomes property of the Treasury.  Of course, there's little reason to wait that long.  Don't let the Treasury get all your interest. The employer most likely has already sent that money that was withheld to the IRS. Therefore they cannot refund you any money. Instead you need to get the money back from the IRS. You do this by filing a tax return.  Your W2C will show that taxes were withheld (I.e., that you paid taxes). The rest of the return will show that no taxes were due and therefore you are entitled to have your money refunded. If you have already filed for that tax you, you just need to file an amended return with the new data. That amendment will show that you are to be refunded the extra money. Then just wait several weeks for the payment from the IRS.  As pointed out user102008, if it is Medicare and social security taxes that have been withheld in error, then you need to file a different set of forms with IRS. It would be nice if refunding FICA also occurred via the tax return. I don't do this at all, but it's the internet, so hey, why not?  According to the IRS, penalties and fines are only non-deductible when they are paid for actual violations of laws/regulations.    So what crushedbyadwarf said is probably correct.  The penalty/fine reduces their income, and they become entitled to a refund on the tax they paid on that income.  It's still a questionable tax treatment of the penalty/fine. I went through this too. There's a safe-harbor provision. If you prepay as estimated tax payments, 110% of your previous year's tax liability, there's no penalty for underpayment of the big liquidity-event tax liability.  https://www.irs.gov/publications/p17/ch04.html That's with the feds. Your state may have different rules. You would be very wise indeed to hire an accountant to prepare your return this year. If I were you I'd ask your company's CFO or finance chief to suggest somebody.   Congratulations, by the way. From my understanding as a seller, and having read through Amazon's 8 page calculation methodology document, the default is the ship to address, however the seller still has the option to charge the tax or not, only charge the state rate and local (city, county, district, etc.) rate(s), or even set their own self-determined default tax rate.  In other words, the seller has a lot of control in determining what rate they use and the billing and shipping addresses may not even matter.  Just remember that whatever tax you pay to Amazon, your state will probably still hold you responsible for calculating and reporting any additional use tax, based on your location.  And if the seller does overcharge for tax you may have a right to request a refund from them. You can change your withholdings (IRS form w-4) to take additional money from your paycheck and get it back when you file a refund. Maybe you could buy a gift visa, place it in a bag and freeze it in a tub of water.  That could help put the impulse on ice for 24hrs. It is natural right to enjoy the money you work for.  Be sure to include some enjoyable spending in your budget or you will be miserable.   When breaking a habit, try to do one thing different, no matter how silly it is.   Anything to bring your attention back to the big picture.