Debt/Salary repayment to employer

[moneybuf]

During 2021, I was required by my employer (US Federal Government) to repay two (2) retention bonuses. The bonuses were distributed in 2019 ($1,500 bonus - $1,289 after taxes) and in 2020 ($1,500 bonus, $1,287 after taxes).  At the time of the payments I was unaware that I no longer qualified for the bonus.  I repaid the bonus money back to the Fed. Gov't during 2021.  Do I have the ability to deduct the $3,000 from my 2021 earnings since I was taxed on those funds as income during 2019 & 2020?

[AmyC]

Yes. Here are your options and how to do it, see What is a Claim of Right Repayment. See also example on page 36 of Pub 525.  In addition, you may need to file Form 843 for Medicare and Social Security taxes to be refunded, also on page 36, third column.

[moneybuf]

Thank you for your input, Amy.  Being that the total amount taxed over the two year period was exactly $3,000, do I have the option to submit a "Claim of Right"?  Because Claim of Right repayment states "in excess of $3,000".

[AmyC]

Oh, $1 can and does change things. This is your tax return. You can take a position and claim it. You would need to disclose your position. The IRS may slide it right through or negate it. See 

About Form 8275, Disclosure Statement - IRS:

Taxpayers and tax return preparers use this form to disclose items or positions that are not otherwise adequately disclosed on a tax return