@PWEB wrote:
Hi,
I have been reading and rereading this threat for awhile and think I have it figured out minus one piece. I did the same thing as another person here: got a bonus in 2018 and repaid it in 2019. I received a W2C for 2018 with boxes 2-6 corrected, but not box 1 (as expected). I recalculated my 2018 taxes uses the W2C two ways: as the W2C looks (not manually subtracting from box 1) and by subtracting box 1. It is my understanding the latter of those values is my credit to be received on my 2019 taxes. However, when I read Pub 525, it calls out "repaid wages subject to social security and Medicare taxes" as a separate option and that I need the employer to refund that. If I use my W2C to calculate a credit for 1341, doesn't that include those taxes (boxes 3-6 are modified)? The IRS pub implies I just change box 1 and nothing else to get the credit, but then what good does the W2C do me?
Thank you!
The IRS 1341 process only gives you credit for income taxes you paid, not employment taxes (social security and medicare).
In some cases, the employer won't adjust the FICA and medicare, either they don't know how, or they don't want to, or the repayment occurs in a tax year after your final pay check, which makes it nearly impossible to adjust. If that happens, you can console yourself that you got a slightly higher social security credit than you deserve, which may increase you retirement benefit and eligibility for disability. (Not much, true.)
If the employer issues a corrected W-2C with boxes 3-6 adjusted, then that adjustment should come back to you in some manner, either by a direct refund or as an adjustment to the amount you must repay, as @Anonymous described.
