Sign on bonus repayment

[Cat_Sushi]

Had gotten payment for sign on bonus in Jan 2025. Left job in November so had to prorate and pay a portion of it back. Paid $17K in December of 2025. 

Been trying to get ahold of someone at old company to adjust W-2 for 2025. But they are so disorganized that I’m not confident they will be able to adjust in time. 

I’m wondering what I would have to do to adjust down income manually so we don’t end up paying taxes on that $17k unnecessarily. 

[Mike9241 · Accepted solution]

You are correct. Since it was repaid in the same year, it should not have been included as compensation. Other amounts such as withholding, etc, would need to be adjusted to reflect the repayment. Try contacting your employer. They are supposed to issue the W-2 reflecting the repayment. If by the end of February (per the IRS webpage) you have had no success, contact the IRS. They want to be contacted, just in case you need to use Form 4852 to report the correct amounts. They will send a letter to the employer. 

From IRS webpage

If your W-2 is incorrect

Ask your employer to correct the error. If your employer doesn't correct it by the end of February, you should either:

• Call us at 800-829-1040
• Make an appointment at an IRS Taxpayer Assistance Center

We'll send your employer a letter asking them to give you a corrected W-2 within 10 days.

We'll also send you instructions for Form 4852, Substitute for Form W-2. You can use it to estimate your earnings.

[Cat_Sushi]

I did call the IRS, the lady talking to me told me that if they had responded "that they're working on it." that they don't need to send them a letter...I did request they make a formal note of it on our individual account. 

Last communication with employer that said they were busy and still working on it was mid March...but they were busy with payroll. 

So I'll sit and wait till about 4/13 until we file our taxes? This is also incurring late fees since we still owe other taxes. Besides that, will turbotax account for our adjusted income based on what we fill out on the 4852? Do we still include the original W-2 in TurboTax? 

I have the exact amount we repaid for bonus, so I assume that impacts boxes 1, 3, and 5 from the W-2?

[ThomasM125]

I would suggest you prepare your tax return based on the correct wages and see if you have a tax due. If so, you can pay that by April 15 to avoid late payment of tax penalties. You can then apply for an extension of time to complete your tax return in the hope that you will get the corrected W-2 in time to file your return by the extended due date in October.

If you have a refund, you can still file the extension but you would have to wait to receive the refund.

Your other option would be to enter the W-2 you have as stated and make a negative adjustment to "Other Income" to report the repayment as a reduction of income. If you do that, you would have to amend your return when you get the corrected W-2 to report the correct wage income and remove the adjustment you made.

You can make that adjusting entry in TurboTax as follows:

1. From the Federal menu in TurboTax find Wages and Income 

2. Find Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Reportable Income

5. Enter a description of the adjustment and the amount as a negative number

You can use this link to make a tax payment to the IRS.

[Cat_Sushi]

This might be an option as we follow-up with the employer. We definitely owe $$ and at this point we will also owe late fees since they withheld less due to the two separate employers for the year. So is it still worth filling out form 4852 when we plan to file an extension? 

[DawnC]

No, you don't need to prepare form 4852 since you are going to file the extension.   But pay your taxes by 04/15 based on the correct figures so there are no penalties incurred.   

[Cat_Sushi]

OK! I think I will try to get an extension and pay taxes owed as projected for federal. Where would I enter in the payment made in turbotax when I'm ready to file? Does the payment come with a form to fill in? 

Also that can hold off my federal but should i prepay my CA state taxes as well and file extension for CA? 

[RogerD1]

To get credit for the payments that you make when filing an extension:

1. Go to Deductions & Credits
2. Scroll down to Estimates and Other Taxes Paid and click on Start or Update for Other Income Taxes
3. The top section will be for payments with extension and you can click on Start for either Payment with 2025 federal extension or Payment with 2025 state extension.

You can file your Federal extension for free on this TurboTax website.  The form will come with a section to estimate your tax liability and declare a payment amount that you plan to send to them.

California grants you an automatic extension of time to file your return with them, so you won't have to file a separate extension just for them.  However, you should plan to also pay your estimated tax liability to California by April 15th as well.  You can make a payment on the California Franchise Tax Board Web Pay site