Repayment of sign in bonus and relocation

[Subhag]

So, i received sign-in and relocation bonuses in 2023, reported them on my tax return, worked until December 31, and then in January 2024, my employer asked for the return of these bonuses. They haven't provided any documentation and suggested resolving it through a third party. Since the bonuses were returned, i am wondering where on the 1040 form i can claim a refund for the taxes paid on these bonuses.

[KrisD15]

If the bonus was repaid the same year, there would be little issue since the income for that year would be reduced by the amount of the repayment. 

When the payment and repayment occur in different years, it gets a little more complicated. 

First, you won't amend or adjust your 2023 Tax Year return, because you DID receive that income. 

Next, if the repayment was 3,000 or less, you could have only reported that on Schedule A on the tax return for the year it was repaid, HOWEVER claiming Miscellaneous Itemized Deductions was eliminated in 2017. If the repayment was 3,000 or less, you won't be able to adjust the income or get a refund of the tax you paid on that income.

If the repayment was more than 3,000, you can use the second option of claiming a tax credit on your Federal Return for the tax paid on that income. This is referred to as "Claim of Right Repayment Credit". 

This credit will be claimed next year when you file your 2024 Tax Year return.

How the credit is calculated is as follows:

After you file your 2023 return, make a new 2023 return, or adjust the one you have changing the income to reflect the repayment (as if that income was never received in the first place) and compare your "adjusted" tax liability to your true tax liability. 

If the tax is less after the adjustment, the difference in tax is the credit you will claim next year.

Be sure you "un-adjust" the 2023 return to reflect the real return you filed. 

Note- You will need to use TurboTax Desktop the year the credit is taken.

HERE IS THE LINK TO DETAILED INSTRUCTIONS AND STEPS

[Subhag]

Thank you for your response. 
What if left the job in 2022 December. Still i have to file claim of right in 2024 return?

And the total amount was $10000 less tax it become 5500$. Do my employer have to provide something? 

[RobertB4444]

It doesn't matter what year the money was on your tax return.  What matters is what year you paid it back.  Since that is 2024 then the credit for repayment will go on your 2024 return.  But you will use your 2022 return to figure out the amount of the credit using the link that @KrisD15 provided above.

Your former employer should provide you with documentation showing that they received the payment.  If you were audited by the IRS then they will want to see that paperwork.  Some employers might even provide you with an amended 2022 W2 in which case you could amend your 2022 return and get the credit instead of waiting for 2024.

@Subhag