Great answer! To expand the question, here is another situation. Employee receives a signing bonus of say 75K. Leaves within the same year and the employer requires it all to be paid back within the same year. Employer did not fix the W-2 so the 75K is included on the W-2 but only the net was actually received by the employee (net of taxes fed state local, 401K, etc). Is this 75K payback with in the same year of receiving still reported as an itemized deduction subject to the 2% limit if itemizing (IRC1341 deduction but its the same year) or as a credit as stated above when its within the same tax year?
