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htw_2019
Level 1

Bonus repayment & partial W2c

Dear Community,

I had 2 employers in 2018.  For one of them, I had to repay a bonus in 2019 that I received in 2018.  I repaid the gross amount as they stated that they would not issue a W2c.  Then several months later in 2019, I received a W2c from them despite their prior statement.  Boxes 3-6 were reduced for the amount of my gross repayment, but not box 1 (Wages).  I ran these new numbers through a 1040-X and it appears that I might owe more taxes because box 1 has remained unchanged while withholding has decreased.  Can you confirm if this seems the the correct outcome? 

 

I have not received a check in the mail from my former employer for the recouped withholding but they have also sent my W2c to my old address.  If they confirm that they never sent a check to me for the withholding, do I have the legal right to request it from them?  Alternatively, if my former employer gets the gross bonus repayment from me and keeps the recouped withholding (essentially recouping the withholding twice), does the IRS have a right to refuse payment or compel them to pay me?

 

I look forward to your replies.

1 Best answer

Accepted Solutions
Anonymous
Not applicable

Bonus repayment & partial W2c

your employer did it right.  they owe you the withholding.

 

reporting the same wages as the original is correct.

 

what you have to do is as follows which means taking a deduction or credit in the year of repayment following IRS publication 525 instructions. It deals with repayments under internal code section 1341

Repayments
If you had to repay an amount that you included
in your income in an earlier year, you may be
able to deduct the amount repaid from your income for the year in which you repaid it. Or, if
the amount you repaid is more than $3,000, you
may be able to take a credit against your tax for
the year in which you repaid it. In most cases,
you can claim a deduction or credit only if the
repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit
transaction.
Type of deduction. The type of deduction
you're allowed in the year of repayment depends on the type of income you included in the
earlier year. In most cases, you deduct the repayment on the same form or schedule on
which you previously reported it as income.  If you reported it as
wages, unemployment compensation, or other
nonbusiness income, you may be able to deduct it as an other itemized deduction if the
amount repaid is over $3,000.

View solution in original post

4 Replies
Carl
Level 15

Bonus repayment & partial W2c

Is the W2C you got for the 2018 tax year?  This matters so I don't waste your time with irrelevant information.

 

htw_2019
Level 1

Bonus repayment & partial W2c

Thanks for checking, Carl.  The 2018 W2c is indeed for the year 2018.  It was just issued late Dec 2019.

Anonymous
Not applicable

Bonus repayment & partial W2c

your employer did it right.  they owe you the withholding.

 

reporting the same wages as the original is correct.

 

what you have to do is as follows which means taking a deduction or credit in the year of repayment following IRS publication 525 instructions. It deals with repayments under internal code section 1341

Repayments
If you had to repay an amount that you included
in your income in an earlier year, you may be
able to deduct the amount repaid from your income for the year in which you repaid it. Or, if
the amount you repaid is more than $3,000, you
may be able to take a credit against your tax for
the year in which you repaid it. In most cases,
you can claim a deduction or credit only if the
repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit
transaction.
Type of deduction. The type of deduction
you're allowed in the year of repayment depends on the type of income you included in the
earlier year. In most cases, you deduct the repayment on the same form or schedule on
which you previously reported it as income.  If you reported it as
wages, unemployment compensation, or other
nonbusiness income, you may be able to deduct it as an other itemized deduction if the
amount repaid is over $3,000.

View solution in original post

htw_2019
Level 1

Bonus repayment & partial W2c

Thank you for the detailed answer and thorough explanation with references.  Much appreciated.

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