@tammey
as with the previous person, who never really responded to me, I can’t really give you a detailed answer that covers your exact situation without knowing all the facts.
The first key principle is that in most cases, if you are a W-2 employee, your employer is required to report all of your income on your W-2 and withhold all the proper taxes, including bonuses. They are not allowed to pay the bonus separately and issue a 1099 for it. That strategy does indeed put you at a tax disadvantage but there is a way to fix it on your tax return.
Suppose you earned a $5000 bonus in 2019 and it was included on your W-2 and you paid tax on it. Then suppose you also earned a $5000 bonus in 2020 but you had a $1000 charge-back so the company only paid you a $4000 bonus, and they added it to your W-2 and withheld all the proper taxes. That doesn’t sound like you are at any disadvantage. You are paying taxes on the income that was actually paid to you during the tax year.
On the other hand, if you earned the $5000 bonus in 2020 and the company paid you the $5000 gross and withheld all the taxes and included it in your W-2, and then demanded that you pay them back $1000 in cash out of pocket for the charge-back, that does put you at a significant disadvantage. If the amount is less than $3000 per year, you can’t recover it on your tax return and you should really try to negotiate a different arrangement with the employer or look for a new employer. If the amount of the repayment is over $3000, there is a way to deduct it on your taxes but it is complicated, and it would certainly be easier if you could negotiate a new arrangement with your employer then to have to fiddle with your tax return in a complicated way every year that you have a charge-back.
