How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask legaleagle Your Own Question

legaleagle
legaleagle, Attorney
Category: Tax
Satisfied Customers: 13441
Experience:  Completed Fed Income Tax in law school, 10 years preparing personally tax returns
4622441
Type Your Tax Question Here...
legaleagle is online now
A new question is answered every 9 seconds

I received a $200,000 retention bonus from an employer in Sept

Resolved Question:

I received a $200,000 retention bonus from an employer in Sept 2010. It was tied into a 3 year promissory note where the amount due back to my employer was reduced by 1/3 on each anniversary of the note and at year 3 it was forgiven. I left this company prior to the first anniversary and had to pay back 100% of the amount I received. However, all taxes (state and federal, this is in California) were taken out of the $200,000 when I received it. This was approx $68k. Since I had to pay back all of the money , I assume that I am entitled to get back most if not all of the taxes I paid. Is this correct?
Submitted: 2 years ago.
Category: Tax
Expert:  legaleagle replied 2 years ago.
Yes if you report that you repaid the money and show that the $68K was paid in taxes, on your tax return you will get to show that you have paid $68K in taxes for 2010 and based on all your other deductions and credits, you should get back the entire $68K if you usually get a return.
legaleagle, Attorney
Category: Tax
Satisfied Customers: 13441
Experience: Completed Fed Income Tax in law school, 10 years preparing personally tax returns
legaleagle and 5 other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Follow up question:

How do I go about this on my tax return? Do I amend my 2010 tax return and reduce my amount of compensation by $200,000?

Or do I reflect this on my current 2011 return? If so, how do I go about that?
Expert:  legaleagle replied 2 years ago.
Since the repayment occurred in 2011 you would include it in your 2011 taxes. Have some proof of repayment in case the IRS asks any questions.

he type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. In most cases, you deduct the repayment on the same form or schedule on which you previously reported it as income. For example, if you reported it as self-employment income, deduct it as a business expense on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040). Repayment over $3,000. If the amount you repaid was more than $3,000, you can deduct the repayment (as explained earlier under Type of deduction ). However, you can choose instead to take a tax credit for the year of repayment if you included the income under a claim of right. This means that at the time you included the income, it appeared that you had an unrestricted right to it. If you qualify for this choice, figure your tax under both methods and compare the results. Use the method (deduction or credit) that results in less tax.
Customer: replied 2 years ago.

One final question:

 

This was included as "wages" so I am deducting as a misc itemized deduction on Schedule A, (Form 1040).

 

My question is this; the bonus was $200,000. I was paid $200,000 which after taxes was $126,640. I paid $126,640 back to my employer (and I have both the signed promissory note reflecting the terms of the deal, etc along with a copy of the cashiers check which I repaid them with so I am fine on documenting this to the IRS if they ask).

 

When I enter the amount of repayment do I use $126,640 (what I actually repaid) or do I use $200,000 (amount I received but was taxed on)?

Expert:  legaleagle replied 2 years ago.
You only enter the amount of the actual repayment.
legaleagle, Attorney
Category: Tax
Satisfied Customers: 13441
Experience: Completed Fed Income Tax in law school, 10 years preparing personally tax returns
legaleagle and 5 other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.