Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
Level 2
posted Apr 7, 2022 10:49:45 AM

If I have to return a retention bonus in 2022 that was paid in 2021 w/ tax witheld, how would I handle the tax filing now?

I was paid a retention bonus in Aug 2021 with the condition that I will have to repay if I leave within 12 months. Tax was witheld on that bonus payment. I later decided to leave the company in Apr 2022 and am now required to repay the retention bonus. My current W2 includes this bonus as compensation. How do I handle this situation from a tax filing perspective?

0 4 3929
4 Replies
Expert Alumni
Apr 7, 2022 11:00:41 AM

You will have to report the W-2 including the bonus on your 2021 tax return.

 

In 2022, when you repay the bonus, you will make a claim of right repayment.

 

If your repayment is less than $3,000, you'll claim it as a Miscellaneous itemized deduction in Schedule A.

 

If the repayment is more than $3,000, please read this TurboTax Help topic on how to make the claim.

Level 2
Apr 7, 2022 11:21:13 AM

Thank you for you reply. I have not yet filed my tax returns yet. I could potentially repay the bonus before I file my taxes for 2021. Would that change the scenario? What would I need from my employer in this case, a corrected W2?

Expert Alumni
Apr 7, 2022 11:38:13 AM

You could possibly if your employer will issue a corrected 2021 W2, excluding the bonus payment. If not, you will need to follow the advice given by MinhT1 given in the previous post.

 

@ljazGoher

Level 2
Apr 12, 2022 8:16:58 AM

My employer came back with the following comment. 

"Since you had access to this payment in 2021, you will not receive a 2021 W2C. The repayment was received in 2022 so the W2C is needed in 2023 for 2022 income. I'm waiting for confirmation that the IRS ruling on prior year overpayments hasn't changed but you won't be receiving a W2C for 2021."

I guess I have to then go with the claim of right approach. Thank you for the help!