Repayment of sign on bonus not to company but to debt collection agency

[dtr4n]

Hi,

In 2021, I left a company before working there long enough so that I had to pay back a sign-on bonus. However, I failed to pay back the sign-on bonus (I blame the company for sending the request to the wrong address, but that's a different story). That bonus then went into debt collection. It wasn't until last year, 2022, that a debt collector reached out to me. I paid that sign-on bonus back to the collection agency. 

When I received the bonus from the company, I didn't get the full amount because of tax. But when I paid it back, I paid the full amount. 

I've been reading on Section 1341. It seems like it would have been the correct form to fill out had I paid the company back. But since I paid the debt collection agency, I'm not sure if this form applies to me.

Am I at loss for getting back the taxed money on the bonus?

[fanfare]

a large bonus over $3,000, paid back, goes on Schedule A Line 16.

you have to itemize deductions.

[MinhT1 · Accepted solution]

This is a claim of right repayment (section 1341). You can only report it in the year you actually repaid the claim.

If your repayment is less than $3,000, you'll claim it as a Miscellaneous itemized deduction in Schedule A.

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

[dtr4n]

Thank you for the reply! So yes, this repayment is more than $3000. But to confirm though, I can claim it in section 1341 even though I paid a debt collection agency and not the original company?

[JulieS]

Yes, IRS 1341 makes no mention that the amount must be repaid to the original payer, only that the income was reported as taxable in a prior year. Click here to learn more.