Signing Bonus Issued 3 weeks before starting job--which form + employee loans

[bananapants]

If an employee signs a contract on June 1st but doesn't start until July 1st, would the signing bonus get a 1099-NEC, 1099-MISC, or be included on the W2?

Also, how does one show employee loans?

[Critter-3]

All employee compensation should be reported as wages on a W-2 form.

Employee loans are not reported on an INCOME tax return  but will be reflected in the company books. 

[xmasbaby0]

Ask the prospective employer.   No one in this user forum will know if the employer will put that sign on bonus on a 1099 or on your W-2.   Nor will we know anything about an "employee loan"--whatever you mean by that.   In general, loans are not income so you do not enter anything about a loan on your tax return.   There are certain kinds of loans for which you can enter the interest paid.

[Opus 17]

If you are the employer, you report all compensation for services performed, including the sign-on bonus, on the W-2.  The bonus is also subject to regular income tax withholding as well as social security and medicare tax withholding.  In other words, if the sign on bonus is $10,000, the employee should get that as a regular pay check with tax withheld, so the take-home amount will be $6000-$7000 depending on the various tax rates.  If you want the employee to get a "net" of $10,000, you will have to gross-up the bonus to around $14,000.  The gross bonus amount and all the taxes get included in the W-2 at the end of the year.

If you are the employee, and the employer issues a 1099-NEC instead of including the bonus in your W-2 wages, that is an indication they are trying to make you pay both halves of social security and medicare.  There is a way to fix this on your tax return but it may result in the company being investigated by the IRS for improperly reporting employee taxes.  So you should check with them and ask them to issue correct paperwork before filing your return, to give them a chance to correct it.

[Bullseye5248]

Glad I found this post.

I have a client that received a W2 for their normal wages AND a 1099NEC for the sign-on bonus.

sing-on bonus for 7500 was issues for 2022, he left dec 2022 and was required to pay back. Unsure how to approach this and don't want my client footing the tax bill for money he didn't get to keep.

>There is a way to fix this on your tax return but it may result in the company being investigated by the IRS for improperly reporting employee taxes. 

Could you provide more details on this point? This company is known for being shady in their industry and if they were to get investigated, my client would be okay with that.

[Opus 17]

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@Bullseye5248 wrote:

Glad I found this post.

I have a client that received a W2 for their normal wages AND a 1099NEC for the sign-on bonus.

sing-on bonus for 7500 was issues for 2022, he left dec 2022 and was required to pay back. Unsure how to approach this and don't want my client footing the tax bill for money he didn't get to keep.

>There is a way to fix this on your tax return but it may result in the company being investigated by the IRS for improperly reporting employee taxes. 

Could you provide more details on this point? This company is known for being shady in their industry and if they were to get investigated, my client would be okay with that.

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If the only thing that was wrong was the issuing of a 1099-NEC for the bonus, you would report the income on form 8919 with code "H".  The employee would 7.65% social security and medicare tax but not 15.3% self-employment tax. 

However, there is no procedure to report a wage repayment in the same year, IRC1341 only applies when wages were received and taxed in a prior year.

In this case, if the W-2 correctly reflects net wages paid and tax withheld, and the entire amount of the 1099-NEC was repaid, all that really needs to happen is the employer should cancel the 1099-NEC and the employee would not report it as taxable income.