Found an issue on this page? Let us know and we will look into it as soon as possible.
Claiming income tax deducted on signing bonus when repaying it back in Full.
Anonymous3 views3 answers
I started a job some time time ago, where my offer included a signing bonus of $10000.
However when I received this, I got a fraction of it (~6.5k) and the rest was withheld by the employer as taxes.
I am now leaving the employer before a certain duration where I need to repay the 10000 in full. I am happy to do that however how do I get the income tax amount back?
I am reading in other forums that there is a way to do this when I file my taxes next. However I do not know exactly what has to be done. What is it that I can do there to clam it? Should I do something now while I repay this that would help me when filing taxes to claim it?
Does any income bracket make any difference here? My wife and I file taxes jointly. I can tell you total gross income if that would affect anything.
This is a little tricky and you really should get a CPA or tax attorney to help you with this. Generally, for withheld income tax purposes the repayment is taken as an itemized deduction in the tax year it is repaid or it can be taken as a credit against the tax paid previously. There are some limitations to taking it as a credit. Employment taxes withheld should be recovered from the employer. Also, because it is a completed transaction in the tax year when the bonus was paid, you would not use an amended return. IRS Publication 525 covers this area.
If you picked up the $10,000 payment as taxable income in year 1 and must repay it in year 2 then, yes, you are entitled to a deduction when you repay it. Talk to a competent tax return preparer as to where to put that on your IRS Form 1040.
