bonus payback

[rfwireless]

I received a signing bonus last year when I joined a company for $25,000 in October of 2020 but received only $19,000 with $6,000 roughly taxed.  In the contract I had to promise to pay back signing bonus if I left the company within 1 year of starting the company.  I left the company in December of 2020 but the company forgot to mention it to me when I left in December and they are asking me to pay back the amount when they first realize it this year January 2021.  They want me to pay back the entire amount of $25,000 or promissory note to pay back within two years in installments.  My question is if I pay back the $25000 this year, before doing 2020 taxes can I get the $6,000 back this year when I file federal return or am I going to get back the $6,000 next year when I file for 2021 taxes since the loss is year 2021.

[ErnieS0 · Accepted solution]

Yes. You will get back part of your $6,000 in taxes as part of your 2020 income tax filing.

The entire $25,000 signing bonus will be included with your salary on your W-2. The $6,000 in taxes includes federal (and state) income tax withheld, plus Social Security (6.2%) and Medicare Tax (1.45%). You will not get back Social Security and Medicare.

The federal income tax withheld will be included in Box 2 of your W-2 (federal income tax withheld) along with withholding from your regular salary. Box 17 (state income tax) will include any state tax withheld as part of your bonus payment.

Your will be able to take a deduction or tax credit on your 2021 income tax return for amounts repaid in 2021 since your included that amount in income in 2020 but had to pay it back in 2021.

See Repayments.

[rfwireless]

Sorry, I was confused by your response.  If I pay back the $25000 in 2021 but deposited only $19000 in 2020 I lost $6000.  In your response you mention that I will be able to deduct the amount in 2021 taxes since it is an income in 2020 but I repaid it back.  So basically, I will get the $6000 in 2022 after filing taxes for 2021.  I want to get the money back expeditiously from the government and it appears I will have to wait based on your response, is that correct? The confusing thing was your opening sentence that says I will get part of it back when I file 2020 taxes?  How does that work if I will claim I paid back in 2021 tax filing.   Also, the company is willing to send me a W2c once they receive the payment in full ($25000), if I receive it this year before filing 2020 then I should be able to file with this W2c and get all of it as part of 2020 tax filing, no?  If get W2c late after filing 2020 taxes, I can still do amended return and get back most of the money correct?

[VolvoGirl]

The W2 you get now for 2020 should include the 25,000 in box 1 and the 6,000 withholding in box 2.  That's how you get credit for the 6,000 now on your current 2020 tax return.  I don't know how it works when you pay back the full 25,000.