My wife received a $6,000 retention bonus payment in 2021. She left the employer in 2022 and thus did not remain employed with her employer for the required amount of time, and she repaid the bonus in 2022. The amount she was required to repay in 2022 was $5,541 (i.e., the $6,000 net of the 6.2% for SS tax and 1.45% for Medicare tax). The employer then issued a W-2c for 2021 adjusting only boxes 3, 4, 5, and 6, reflecting the reduction of $6,000 in SS and Medicare wages and the reduction of $372 in SS tax withheld and $87 in Medicare tax withheld.
I understand the claim of right issue and the need to file an amended 2022 income tax return, so my questions here pertain ONLY to the SS tax and Medicare tax issue for 2021 and are this:
1. Does she need to file an IRS Form 843 to get back the $372 in SS tax and $87 in Medicare tax that was withheld when she got the $6,000 retention bonus payment in 2021?
2. If so, is the W-2c all that is required to be sent with the IRS Form 843 as there was no "employer statement" as mentioned in the instruction to Form 843?
Your employer should have refunded the payroll taxes to you, since they would have received that from the IRS when they amended the associated payroll tax returns. If they won't do that, then you should issue the Form 843 along with the W-2c and an explanation as to why your employer won't refund the taxes.
Thanks. However, I keep turning this issue over and over in my mind and is it possible that the Form 843 does not need to be filed at all since my wife only had to pay back $5,541 (i.e., the $6k minus the SS and Medicare taxes)?
That sounds correct. That is how the employer refunded the tax to her - by not having her pay it back. So she has already received the social security and medicare that was withheld and just needs to amend that 22 return for the $5541.