Repaying signing bonus

Forum|Forum|4 years ago
March 16, 2022
2 replies
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I'm new to TurboTax and was hoping for some insight on bonus repayment. I joined a company in 2020 and received a signing bonus but when I left I had to return the bonus. It was over $3000. They asked me to return the net bonus, which was still over $3000. When I returned the bonus in 2021 they corrected my W2 and didn’t change the wage box, which I've read is normal since it was repaid in the following year. My income for 2020 includes the gross bonus, so I ended up overpaying on my taxes. They told me I would be able to claim a credit when filing 2021 taxes. The company and I are both based in NYC. Would I be able to use the section 1341 claim of right option for this?

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MinhT1

Level 15

Yes, that will be a section 1341 claim of right repayment.

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

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kindabored23Author

Level 2

Thanks for confirming. The article you linked mentions "You can manually calculate the amount, or you can use TurboTax CD/Download to calculate it for you. Make sure you use the same version of TurboTax that you used when you paid the taxes." If I haven't used TurboTax before, would I still be able to do this? @MinhT1

kindabored23Author

Level 2

You can still take the credit by recalculating your tax in the previous year even if you didn't use TurboTax. However, you would need to do the calculation manually, or by using the software you used to prepare the original tax return. Also, you could re-prepare the tax return in TurboTax to determine the credit instead of using the other tax product.

Thanks. How would I go about re-preparing the tax return in Turbo tax? Probably would want to do it that way to make it simpler @ThomasM125

Ashley2867

Level 2

Received $5000 sign on bonus in 2019. Had to pay it back in middle of 2020. How or where do I enter the tax credit on my 2021 taxes when I manually figure the tax difference?

Vanessa A

Level 15

You cannot take a credit in 2021 for something you paid back in 2020. You would need to Amend Your Return for 2020 to reduce your income by the $5,000.

When you go to Amend your 2020 return, you will take the following steps to reduce the income by $5,000.

Federal
Income and Expenses
Scroll down to Less Common Income and click Show More
Start next to Miscellaneous Income
Start next to Other Reportable Income
enter description as repayment of 2019 bonus in 2020 then for amount enter -$5,000

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