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I got a job in May 2008, and I recieved a 1 yr contract and

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a $10,000 sign on bonus...
I got a job in May 2008, and I recieved a 1 yr contract and a $10,000 sign on bonus. Approximately $4,000 went to taxes and I recieved $6,000 in cash. I have elected to leave the company and I have to pay the $10,000 back, I was wondering if there was anything I can possibly do on my income taxes to recoup my loss?
Submitted: 8 years ago.Category: Tax
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1/4/2009
Tax Professional: Lev, Tax Advisor replied 8 years ago
Lev
Lev, Tax Advisor
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Do you repay in 2008 or in 2009?
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Customer reply replied 8 years ago
2009, but could you give me both senarios?
Tax Professional: Lev, Tax Advisor replied 8 years ago

If you received and repaid the full amount in 2008 - your employer would exclude the amount from your taxable amount on W2 and you do not need any additional reporting.

Any tax withheld may be claimed the same way as for other payroll withholding.

 

If you will repay in 2009 - you would need to report repayment on your 2009 tax return - please see for reference the IRS publication 525 page 36 - http://www.irs.gov/pub/irs-pdf/p525.pdf - because the amount you repaid is more than $3,000, you may be able to take a credit against your tax using either of method:

Method 1. Figure your tax for 2007 claiming a deduction for the repaid amount. If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28.

Method 2. Figure your tax for 2007 claiming a credit for the repaid amount. Follow these steps.
Figure your tax for 2007 without deducting the repaid amount.
Refigure your tax from the earlier year without including in income the amount you repaid in 2007.
Subtract the tax in (2) from the tax shown on your return for the earlier year. This is the credit.
Subtract the answer in (3) from the tax for 2007 figured without the deduction (step 1).
If method 1 results in less tax, deduct the amount repaid. If method 2 results in less tax, claim the credit figured in (3) above on Form 1040, line 70, and enter “I.R.C. 1341” in the column to the right of line 70.

Please be aware that the publication is not updated yet for 2008 - so you need to adjust 2007 to 2008. It is expected that the publication will be updated in few days.

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