@Bullseye5248 wrote:
Glad I found this post.
I have a client that received a W2 for their normal wages AND a 1099NEC for the sign-on bonus.
sing-on bonus for 7500 was issues for 2022, he left dec 2022 and was required to pay back. Unsure how to approach this and don't want my client footing the tax bill for money he didn't get to keep.
>There is a way to fix this on your tax return but it may result in the company being investigated by the IRS for improperly reporting employee taxes.
Could you provide more details on this point? This company is known for being shady in their industry and if they were to get investigated, my client would be okay with that.
If the only thing that was wrong was the issuing of a 1099-NEC for the bonus, you would report the income on form 8919 with code "H". The employee would 7.65% social security and medicare tax but not 15.3% self-employment tax.
However, there is no procedure to report a wage repayment in the same year, IRC1341 only applies when wages were received and taxed in a prior year.
In this case, if the W-2 correctly reflects net wages paid and tax withheld, and the entire amount of the 1099-NEC was repaid, all that really needs to happen is the employer should cancel the 1099-NEC and the employee would not report it as taxable income.
