@YUIXO9 wrote:
Hi @Opus 17,
Hope you're doing well! I am currently in a similar position as the original poster. I would like to avoid any headaches in regards to returning bonuses in the subsequent tax year.
I joined back in April and am planning on resigning the first week of January. Do you suggest I return my sign on bonus prior to leaving in January? Are there any possibilities of unforeseen complications despite paying back my sign on bonus early?
The ideal situation is you inform the company now and they take their bonus back by reducing your salary for the rest of the year. That way, your 2020 monies received matches your W-2, you get taxed on what you received, and no future adjustments are needed.
If the company won't do it this way, so that your W-2 for 2020 (and next year's W-2 for 2021) reflect the gross amount paid and you make the repayment after taxes; then you need to make a claim of right on your federal and state return, and you will need to file a form 843 for your social security and medicare taxes. You would be made whole eventually, but it's a lot of paperwork.
If your W-2s show your original gross salary and you make the repayment after tax, then I would make the repayment in 2021. The claim of right is for "wages paid in a prior year"and I don't really know what would happen if you repaid a 2020 bonus in 2020 and tried to claim the credit. But if you can repay in 2020 and the company will adjust your W-2 and your social security and medicare, then that's the best way all around.
