@gold8 wrote:
Hi Opus 17,
I got the money in 2018 and repaid in 2019. The HR did not change my W2 although I required. The $4,000 does not include the FICA OASDI adj and FICA HI adj, HR told me they made the adjustment. But they did not adjust the federal and state tax, and told me I could get them back when I do tax return.
Thanks.
If you paid no tax on this money in 2018, you can't claim a credit or deduction for repaying it.
If married filing jointly with 2 kids, you would pay no income tax if your gross income was around $57,000 or less. Your tax liability would be on line 13. If line 13 is zero, then you paid no income tax on your wages including the $4000 you had to repay. If that $4000 had not been in your wages in the first place, you still would have paid no tax. The bonus did not increase your taxes, so you don't get to use the IRC 1341 Claim of Right credit when you repaid the bonus in 2019. You might be able to use the special itemized deduction, but it won't help you if your standard deduction is larger.
Bottom line: paying this money back does not get you a tax break because you did not pay tax on it in the first place.
As regards the social security and medicare tax, if your employer is generous and kindly and wants to do the paperwork, they can adjust your 2018 W-2 (issue a W-2C) reporting what your social security and medicare taxes would have been if not for the extra money you now have repaid (about $306). If they adjust your SS and Medicare tax, that money should come back to you either as a rebate or as a reduction of the amount you must repay ($3694 instead of $4000 for example.)
Or, if they don't want to do the paperwork, they can simply say, "we paid you that money in 2018 and SS/medicare took the taxes and it's your problem to get it back." In that case, you need to file form 843 with the IRS to request a refund. This is filed separately from your tax return, and is not included in Turbotax, you will have to do it on your own. You would include proof that you paid the SS/Medicare tax (a copy of your 2018 return); proof that you repaid wages; and proof that your employer did NOT reimburse you for the SS/Medicare tax or reduce your repayment as a reimbursement (you need a letter from your employer stating they did not rebate the taxes to you.)
https://www.irs.gov/pub/irs-pdf/i843.pdf
https://www.irs.gov/pub/irs-pdf/f843.pdf
