paid back signing bonus

Discussion in 'Tax' started by Arvind, Mar 4, 2009.

  1. Arvind

    Arvind Guest

    Hi,

    I changed jobs last year. When I left my job, I was asked to pay back
    my entire signing bonus and relocation bonus ($9000) they paid me in
    2007.

    I heard from experts that I can itemize this amount in schedule A. I
    have a few questions and would appreciate your answers.

    1. Can I deduct the money I paid back by itemizing it in schedule A?
    2. If yes, can I itemize the full amount I paid? I heard that I
    cannot itemize the full amount, but have to subtract 2% of my gross
    income from it.
    3. When I left my old company had to pay for my vacation hours. So
    they deducted 9,000 from this to compensate for the signing bonus
    +relocation I had to give back. That is, I did not really cut a check
    to my company. I have a mail from them showing that 9,000 was taken
    back. Will this be sufficient to claim this as a deduction?

    Thanks,
    Arvind
     
    Arvind, Mar 4, 2009
    #1
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  2. Arvind

    Steve Pope Guest

    It seems to me you have no deduction because you never returned
    any net overpayment.

    Steve
     
    Steve Pope, Mar 4, 2009
    #2
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  3. If the 9k is included in your income (that is, in your W2 at the end
    of the year), then you can deduct it. So pay attention to your W2
    when you receive it. You're right about the 2% rule. The other
    option, which will usually yield a better result, is to take a tax
    credit using section 1341. See http://www.irs.gov/irm/part21/ch06s11.html
    and search for "IRC Section 1341".
     
    removeps-groups, Mar 4, 2009
    #3
  4. Arvind

    D. Stussy Guest

    1) The $9k had to be included on your 2007 W-2 as taxable. (However, as
    your signing bonus was contingent on being an employee for a certain amount
    of time - which you ultimately didn't stay for, you may not have had an
    "unrestricted right" and therefore it might have been excluded from your
    2007 pay.)

    2) The $9k taken from your pay in 2008 had to NOT reduce your 2008 W-2.
    (Technically, this yields an improper result under IRC Section 1341, but
    when the employer recaptures it and excludes it from pay, you've received
    your benefit of repayment).

    If BOTH conditions are met, then you have a $9k deduction on line 28 of
    your 2008 Schedule A.
    Your questions:
    1) Yes - subject to the above.
    2) Yes; No. It is NOT subject to the 2% floor because the amount exceeds
    $3k.
    3) No. Depends on 2007.
     
    D. Stussy, Mar 4, 2009
    #4
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