Hello,
I received sign-on bonus in 2023 when I joined some company. As I left that employer before one year, I returned a partial amount of bonus in Oct. 2024. I got a corrected W2 (W2c) from the employer with only boxes 3, 4, 5 and 6 updated. I got refund for extra medicare/ss tax from the employer. Now, when I use TT desktop to amend return for 2023, as box 1 is not changed, TT shows an additional tax liability for federal tax. How's that possible?
In addition, I have few other questions:
a) Is amending 2023 is the right thing to OR should I claim a credit on 2024 return under IRC 1341?
b) As box 1 is not updated in W2c, is it a mistake from employer and I should seek revised W2c with box 1 updated?
c) If amending return is advised, can I just amend the return with revised figures for box 1 on my own even though W2c from employer doesn't revise that?
d) Can I assume the same revised figures (i.e. W2 wages - returned bonus amount) for state wages as well even though W2c doesn't have any box updated for state?
Would appreciate your responses. Thanks.
since repayment was in a different year you do not amend 2023. if the gross wages repaid was $3,000 or more you could take a deduction on the 2024 schedule A line 16 denoted as IRC 1341 repayment OR
recompute the taxes for 2023 by excluding the wages repaid from income. The decrease in taxes is taken as a credit on your 2024 schedule 3 line 13b
if the repayment was not net of the applicable FICA and Medicare taxes you need to file form 843 to get them refunded. see the instructions for line 7
https://www.irs.gov/forms-pubs/about-form-843
What about amounts less than $3,000?
Beginning in 2018 with the Tax Cuts And Jobs Act, miscellaneous deductions are no longer permitted. So if the amount repaid was $3,000 or less, you are not able to deduct it from your income in the year it was repaid.