Bonus Repayment Question - W2c / Claim of Right

[Chee_Am]

I resigned from my former employer in April and had to repay the signing bonus that I had received in February. Despite several unsuccessful attempts to have my former employer adjust the paystub to reflect the bonus repayment, I was informed by their HR department that there is a way to claim a deduction for the repayment on my 2023 tax return, which led me to discover Section 1341.

Here are my questions:

1. Is the employer obligated to issue the correct W-2 form for my situation?
2. Can I claim the deduction for the repayment on our 2023 tax return, even if both the bonus receipt and repayment occurred in the same year, 2023?
3. Since I only have W-2 income, which schedule, or form should we use to claim the deduction? Can I use the same method as when you make a claim of right repayment, either calculate the credit or take a duction?

[tagteam]

See https://ttlc.intuit.com/turbotax-support/en-us/help-article/taxation/claim-right-repayment/L0aW5v3Tp...

and

https://ttlc.intuit.com/community/taxes/discussion/what-is-the-irc-1341-repayment-credit-in-layman-s...

[rjs]

The Section 1341 deduction or credit is specifically for repayment of an amount that you reported as income in an earlier year. When the repayment is in the same year that you received the income, the employer should adjust your W-2. Since there's still time before the end of the year, making the adjustment should not be a big deal for them. I don't know how strong the legal obligation is for them to make the adjustment, and I can't cite a authoritative source.

Have you spoken to anyone in the Payroll department? HR might not be aware of what Payroll is doing. And don't rely on HR for tax advice.

I don't know what the solution is if the employer refuses to adjust the W-2.

[Opus 17]

I agree that the Claim of Right procedure is not the correct procedure in this case.  Your employer should adjust your W-2 to reflect the net wages (after repayment).

If it does not, you can file your tax return with a "substitute W-2" form, but be prepared with documentation to explain if the IRS asks.

You might also file a complaint with your state labor board, since the employer's refusal would be costing you additional tax money (as well as, presumably, they will be over-taxing you on social security and medicare tax).  

But the 1341 procedure is not applicable in this case.