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I was paid a signing bonus in 2014 and repaid it in 2015. How does this effect my 2014 tax year?

Forum|Forum|6 years ago
May 31, 2019
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How will this effect my 2014 tax return? Does the bonus count as taxable income for 2014 then I claim it back in the 2015 tax year since that is when it was repaid? Do I need a W2-C for 2014 from my employer?

Bonus was received in 2014, employer retained my last paycheck to pay back a portion in 2014, I paid the remaining balance in one lump sum in 2015.

To clarify. The bonus did count as taxable income when paid. The bonus amount was 10,000. I received that amount less taxes in 2014. I paid back the company a total of 10,000 dollars with about 8,000 of that being paid in Jan 2015. So somewhere in there I paid them back several thousand dollars that I didn't actually receive (the taxes that came out initially). The taxes I initially paid on the bonus when received should be deducted somehow since I gave the income back right?

I would like to know if I need to wait for a corrected W-2 to file my taxes this year or if it is handled in some different way. I am having a difficult time getting my former employer's payroll department to respond to my questions. Once they got their money back they lost interest in assisting me...

Best answer by Hal_Al

The $8,000 net bonus income is taxable in 2014. You will have to claim the 2015 pay back on your 2015 return. The withholding will be in box 2 of your 2014 W-2 and will be applied toward your 2014 calculated tax. You may or may not get some back. You're stuck with the FICA tax paid; you can't get that back.

Repayments. This situation is described in IRS Publication 525. pgs 36-37. You can take a misc itemized deduction, on line 28 of schedule A (not subject to the 2% of AGI threshold) Or you can take a credit. The credit is computed by refiguring the tax return from the previous year as if the income had not been received. Then the difference in tax is claimed as a credit on the current year's return. In the forms mode (the forms mode is not available in the on-line versions of TurboTax[TT]), you can use the line 70 smart work sheet to enter the credit amount on line 70; select item F, claim of right under IRC 1341 for repayments. TT will enter "I.R.C.1341" in the margin of form 1040. TT does not do the calculation or compare it to the alternate deduction.

So, the taxpayer has the option of either claiming the credit or deducting the repayment as a miscellaneous itemized deduction, whichever provides the greater benefit. But, you cannot file an amended prior year return. If the amount is $3,000 or less, only the miscellaneous itemized deduction is allowed and is subject to the 2% of AGI threshold; it goes on line 23 (instead of line 28) of schedule A.

Hal_AlAnswer

The $8,000 net bonus income is taxable in 2014. You will have to claim the 2015 pay back on your 2015 return. The withholding will be in box 2 of your 2014 W-2 and will be applied toward your 2014 calculated tax. You may or may not get some back. You're stuck with the FICA tax paid; you can't get that back.

Repayments. This situation is described in IRS Publication 525. pgs 36-37. You can take a misc itemized deduction, on line 28 of schedule A (not subject to the 2% of AGI threshold) Or you can take a credit. The credit is computed by refiguring the tax return from the previous year as if the income had not been received. Then the difference in tax is claimed as a credit on the current year's return. In the forms mode (the forms mode is not available in the on-line versions of TurboTax[TT]), you can use the line 70 smart work sheet to enter the credit amount on line 70; select item F, claim of right under IRC 1341 for repayments. TT will enter "I.R.C.1341" in the margin of form 1040. TT does not do the calculation or compare it to the alternate deduction.

So, the taxpayer has the option of either claiming the credit or deducting the repayment as a miscellaneous itemized deduction, whichever provides the greater benefit. But, you cannot file an amended prior year return. If the amount is $3,000 or less, only the miscellaneous itemized deduction is allowed and is subject to the 2% of AGI threshold; it goes on line 23 (instead of line 28) of schedule A.

T

tfunkusnAuthor

Alright so I will need to do some calculations next year when doing my 2015 taxes to determine whether to treat the pay back as a deduction or a credit. For this year (2014 tax year) just do my taxes normally reporting the bonus paid as income straight off my W-2, no corrections.