W-2 after same-year signing bonus repayment

Forum|Forum|2 years ago
March 1, 2024
2 replies
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Hi, I received a $30,000 signing bonus in 2023 which I repaid in full (gross amount, including all taxes: federal, state, Medicare, Social Security) as I left the company early. The repayment was done in 2023.

The employer issued a W-2 that adjusted all boxes as if I have never received this bonus. However, I repaid the full gross amount, as mentioned above. They have not provided any refund for any of the taxes I repaid.

I want to submit Form 843 to recover Medicare and Social Security taxes that I overpaid; also, I want to make sure that I receive as much refund as possible for the remaining taxes (federal, state).

That said, I would appreciate your help with some questions:

Should the 2023 W-2 include the amount of over-collected taxes (federal, state, Medicare, Social Security) that I repaid but never received? If yes, which W-2 Boxes should be adjusted? It looks to me that the W-2 is incorrect.
Can I still file IRS Form 843 for Social Security and Medicare refund if the W-2 does not include those taxes in Boxes 4 and 6?

Not A Product Question

KrisD15

Level 15

Are you sure you overpaid?

All employers pay those taxes the last day of the month following the end of the quarter.

So if the repayment was made before January 31 2024, your employer may have had time to adjust the FICA for the repayment.

Look at your paystubs after you made the repayment to see if those taxes were reduced.

I would not expect to see an adjustment or credit in Boxes 4 and 6, they should just report the correct amount your employer withheld.

Enter the W-2 to see if the program alerts you to over paying Social Security. (If yes, then you do file Form 843)

Since you say they corrected the income, multiply Box 3 by .062 and that should be the tax withheld in box 4.

Multiply box 7 by .0145, that amount should be in box 6. If your income is over 200,000 for the year, add another .9% Medicare tax for the income over 200,000.

In other words, lets say they had withheld 2,295 FICA for the 30,000 bonus, then you earned another 30,000 after that. Your employer might have stopped withholding tax after the repayment until you were caught up.

Let's say you only earned 15,000 after repayment, maybe they INCLUDED 1,147.50 in your paycheck but did not include it as income since you were already taxed (FEDERAL) on it.

Since the repayment was made the same year before you left, the employer would not hand you a check for the FICA on that bonus, they would reconcile it all on your final paycheck.

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Opus 17

Level 15

Let me break this down into parts.

Did they reduce your box 1 taxable wages but not your box 2 federal withholding? This is correct, they withheld what they withheld, and that's a credit to your account with the IRS. It was correct that you repaid the gross amount. With your box 1 wages being less, you should now have a significant overpayment of your federal withholding resulting in a larger than normal tax refund.

Did they also reduce your box 16 state taxable wages but not your box 17 state withholding? This is also correct, for the same reason, and you should expect a larger than normal state tax refund.

Did they reduce your box 3 and 5 social security and medicare wages but not change your SS and medicare tax? This is a bit odd, but it will result in your tax being too high (box 4 should be 6.2% of box 3 and box 6 should be 1.45% of box 5). If the taxes are too high, this will help prove your case when you file form 843. However, Turbotax will complain about it, but hopefully will still let you e-file.

If they reduced box 3 and 5 wages AND ALSO reduced your box 4 and 6 taxes, they should refund those taxes to you directly. If they don't, you will have a problem with form 843 since it will look to the IRS like they did refund the taxes. You will want to get a letter from the company explaining what they did, to support your 843 filing. If they did not reduce boxes 3-6 at all, you will have an even trickier issue with your form 843. (However, remember that the maximum value for social security wages in Box 3 is $160,200. If your wages were $200,000 and were corrected to $170,000 with the bonus payback, that won't change box 3 and box 4 and you aren't entitled to a refund since your salary is still more than the maximum SS base wage.)

koursarosAuthor

Level 2

Hi @Opus 17 thanks a lot for your thorough response!

To answer your questions here is how my W-2 was adjusted after the repayment of the full gross $30K amount:

All income-related boxes (Box 1, 3, 5, and 16) were reduced by the gross amount of the repayment, i.e., $30,000 and they all have the same value.
Federal taxes: Box 2 has not been adjusted which seems correct, per your comment.
State taxes: Box 17 has not been adjusted which seems correct, per your comment.
Social Security taxes: Box 4 has been adjusted even though I have not received any refund or credit by the employer for the over-collected Social Security tax. This is 6.2% of Box 3 which does not reflect the repaid Social Security.
Medicare taxes: Box 6 (same issue as Box 4) has been adjusted even though I have not received any refund or credit for the over-collected Medicare tax. This is 1.45% of Box 5 which does not reflect the repaid Medicare.

Note: Box 3 is less than the maximum Social Security-taxable earnings limit for 2023, i.e., it's less than $160,200.

@KrisD15 thank you for your response! I am sure that I overpaid as the repayment was done on the same day I left the company and there are no paystubs issued after that to me, nor any refund of these taxes whatsoever.

@Opus 17 it seems that my case falls under the last paragraph in your comment. Since they reduced Box 3 and 5 wages and also reduced Box 4 and 6 taxes, I will ask for a direct refund to me, a corrected W-2 (W-2 C) or a statement confirming the over-collection.

Opus 17

Level 15

@koursaros wrote:

@Opus 17 it seems that my case falls under the last paragraph in your comment. Since they reduced Box 3 and 5 wages and also reduced Box 4 and 6 taxes, I will ask for a direct refund to me, a corrected W-2 (W-2 C) or a statement confirming the over-collection.

You don't necessarily need a corrected W-2 (W-2C).

Since you now presumably have pay stubs showing that you had (let's imagine) $7000 of SS tax withheld, but your W-2 shows you only had $5200 of SS tax withheld, I would ask what happened to the other $1800 that was very clearly withheld, but not credited to your account. (And similarly for the Medicare tax.) They withheld it, according to their own W-2 they should not have withheld it, so it should come to you as a refund. Get your correspondence in writing, so that you can take that to the IRS if needed, along with copies of your pay stubs and so on.

Alternately, they could issue a W-2C showing the revised (minus the payback) box 1 and box 16, but showing the original box 3-6. That would support your claim for a refund on form 843.

If they refuse both a refund and a corrected W-2, you may have a legal case against them, and I would start by complaining to your state's wage and hour (labor) regulatory agency. You can still apply for a refund of the SS and medicare tax using form 843 but it will be harder to prove your case with the W-2 you currently have.