Repay signing bonus

Discussion in 'Tax' started by topsocket, Apr 11, 2005.

  1. topsocket

    topsocket Guest

    I received a small signing bonus with a job I may be
    leaving. The condition of the binus requires 100% repayment
    if I leave before a specified period.

    Now, the "bonus" was $5,000.00, but after taxes and such, I
    only receieved ~$3,100. What amount, then, do I need to
    repay to the employer? If it's the full amount, how can I
    recoup the difference between amount paid and amount
    awarded?

    Thanks.
     
    topsocket, Apr 11, 2005
    #1
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  2. Now, the "bonus" was $5,000.00, but after taxes and such, I
    Your employer probably requires you to repay the full
    $5,000. In the year you repay the bonus, you may:

    1) deduct the repayment as an itemized deduction on Schedule
    A, not subject to the 2% of adjusted gross income (AGI)
    floor, or

    2) claim a refundable credit for the amount by which the
    $5,000 increased your tax for the year you received it.

    You may choose whichever of the two options above yields the
    greater tax benefit.

    For more information on repayments, see Repayments beginning
    on page 31 of IRS Publication 525.

    http://www.irs.gov/pub/irs-pdf/p525.pdf

    Frederick Lorca
     
    Frederick Lorca, Apr 12, 2005
    #2
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  3. No, you received $5,000.

    Then, essentially acting as your agent, the company made tax
    payments on your behalf from your funds.

    It's like you got $5,000 and then turned around and paid the
    $1,900 in taxes to the government yourself.
    Since it is for more than $3,000, read up on "claim of
    right". You may well be out of luck with respect to social
    security and medicare taxes, though.
     
    Rich Carreiro, Apr 13, 2005
    #3
  4. topsocket

    Steve Pope Guest

    What amount, then, do I need to repay to the employer?
    Not necessarily, employers have certainly accepted partial
    payment, or even no payment at all in these cases.

    In my opinion it would not be unreasonable to offer the
    employer the net amount of the signing bonus check, and see
    what they say.

    Tangentially, if the employer does accept $3000 or $5000
    back from the employee, how does the employer report it? As
    revenue?

    Steve
     
    Steve Pope, Apr 16, 2005
    #4
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