Claim of Right Tax Credit (signing bonus clawback)

[DoctorL]

I received signing bonus (over $10k) in 2020. Then I left the employer and had to repay the amount.

I've read several discussions regarding the claim of right tax credit, but still haven't figured it out exactly.

Let's say I received $20k. Then I paid back the net amount I received ($20k - federal tax, social, medicare, state) last year (2021).

I received the bonus repayment letter from the previous employer and it also stated that I paid back the net amount.

I am doing tax return for the year of 2021 - I am trying to follow this instruction: "calculate the amount of tax you overpaid and take a refundable credit." Do I need deduct the total amount of the bonus ($20k) from 2020 year's total income then calculate the tax difference? Or do I need to deduct the net amount I paid back from 2020 year's total income then calculate the tax difference?

If I am wrong in both way, please let me know the right way to do this.

Thank you!

[fanfare]

"deduct the total amount of the bonus ($20k) from 2020 year's total income then calculate the tax difference,"

that's how I would interpret "tax overpaid", but I don't know if you can also  include medicare and SS withholding prorated. if you're over the max on those deductions from income already, it doesn't matter.

Note: I'm not a tax expert.

[Mike9241]

consider that on the 2020 w-2 you got a tax credit for the state, Federal and Fica taxes total about $10,000. that's like money in your pocket that you get to keep. or another way to look at it is you got a $10,000 bonus all of which went to payroll taxes.

did you work for the company in 2021 because the repayment may be reflected on your w-2 or you might get a w-2c

if not, you can take either an itemized deduction in 2021 for the $10K  (this may be the default Tubotax method which may not be optimal) 

or you can recompute your taxes for 2020 excluding the $10K.  the decrease in tax can be claimed in 2021 on schedule 3 line 12z and label it 1341 repayment credit