@agrawal_aashish wrote:
Hi @Opus 17
Firstly, thanks so much for your insightful answers!
To make sure I'm understanding correctly, in my current scenario where my ex-employer is adjusting my bonus repayment ($7k i.e. less SS/medicare) against my after-tax annual bonus, I forgo my $1800 and $420 state and federal claim of right tax credits on the 2020 tax returns? Is that correct?
And if so, it sounds like I don't lose out on any money versus cutting them a check of $7k, and then receiving my annual bonus separately?
Thanks again!
If the deduction is pre-tax, you don't file a claim of right. If the deduction is after-tax, you do file a claim of right credit.
Let me try and explain (numbers are approximate)
You have a $10,000 bonus paid as a separate check.
After tax
$10,000
Fed withholding on $10,000= $2,200
State withholding on $10,000=$600
SS/Medicare on $10,000=$765
Net bonus after tax $6435
After-tax repayment of prior bonus $6926
Take-home pay zero (or you might even owe them some money)
Pre-tax
$10,000
Pre-tax deduction of $7,500 repayment
Gross taxable bonus $2500
Fed withholding on $2500= $550
State withholding on $2500= $150
SS/Medicare on $2500= $191
Net bonus after tax and repayment $1609
With pre-tax deduction of the repayment, you get more money now and can't claim the credit on your tax return. With after-tax repayment, you get less money now but you can claim credits on your 2020 state and federal tax returns that will increase your refunds and get you the extra tax money back.
