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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16544
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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My employment contract requires me to repay half of my sign

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My employment contract requires me to repay half of my sign on bonus which was $10,000. They have asked for $5,000 back. My question is that since social security, medicare, fed taxes and state taxes were with held and my net was around $6,200, do I owe $5,000 or $3,100?

Megan C :

Thank you for your question, and thanks for using JustAnswer.com. Unfortunately, you will have to pay back the full $5,000 but you will be able to take that amount as a deduction on your current year tax return

Megan C :

The employer is to refund to you any overpayment of social security and medicare taxes.

Megan C :

Per the IRS, "If the employee repays the advance or overpayment in a later year, the amount of the repayment cannot be excluded from the employee’s income for that year or any year. The employee may be able to take a deduction from income or a tax credit on his or her personal tax return for the repayment, subject to certain restrictions. While the employee’s Form W-2 for the year of the repayment would be unaffected by the repayment, the employer should give the employee a separate receipt showing the repayment."

Customer:

So the employer is refund this amount directly?

Megan C :

For social security and medicare taxes "If the employee repays the advance or overpayment after the
employer has filed its Form 941 for the quarter during which the overpayment was made (whether during the same or a later year), the employer must refund any overwithheld social security and Medicare taxes to the employee. The employer must keep a receipt noting the date and amount of the employee’s repayment, as well as written evidence of the refund paid to the employee. A written statement should also be obtained from the employee to the effect that the employee will not seek a refund of the social security and Medicare taxes directly from the IRS. This must be obtained before the employer can claim a credit or refund of the employee’s and employer’s shares of overpaid social security and Medicare taxes (see Section 8.6 for details on how this is accomplished). If the repayment is made in a year after the advance or overpayment was made, the repayment will not reduce the employee’s social security or Medicare wages for the year of repayment. If the repayment results in an overpayment of social security or Medicare taxes for the earlier year (i.e., the employee’s wages for the earlier year did not reach the social security wage base even after considering the repayment), the employee must be issued a Form W-2c, Corrected Wage and Tax Statement, for that year."

Megan C :

They should, or you can make arrangements with them to deduct that from your repayment.

Customer:

ok thanks

Megan C :

Is there anything else that I can assist you with today?

Customer:

No, this is all for today

Megan C :

Okay when you are satisfied with our communication, please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today

Customer:

will do

Megan C :

Thanks so much!

Megan C :

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