Bonus repayment & partial W2c

[htw_2019]

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.

[Carl]

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

[htw_2019]

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

[Anonymous · Accepted solution]

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.

[htw_2019]

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

[Schagane]

Could you please explain what is a possible reason, that when I amend the return using w2c numbers I ended up owing more money. I owe exact a difference between social security tax reported on the aboriginal w2 and a new w2c. I thought I supposed to get my taxes back, since I repaid the bonus. Why I owe more on my amended return after I imput corrected W2c?

[Mike9241]

in the future please start your own thread. tax laws change and the situations may not be identical

did you repay in the same year you got the bonus or in the following year? it matters.

same year the amounts on the w-2 (boxes 1 through 6 and possibly some others) would be adjusted so it would be like you never got the bonus.  

same year - the case where a change in social security taxes would matter is when originally you had multiple employers and went over the social security limit. that excess was a tax credit. now with the revised w-2 that credit amount is reduced so you owe.

if in the following year was the repayment more than $3,000. if not you get neither a deduction nor credit for the repayment. if it was, what you do is either take an itemized deduction for the repayment or a tax credit. the credit is computed by recomputing your taxes in the prior year without the bonus. the difference in taxes becomes a tax credit reported on the return for the year of repayment as section 1341 credit line  13xz of schedule 3.

not sure what you are doing since we can't see your return.