relocation bonus???

Question

a company offered me a relocation bonus of 10,000 but ihave to sign an agreement that i should stay with them for at least 24 months. which i did signed. out of the 10,000 i just got around 6,400 due to taxes.. now after 2 mos i have to leave the company for some reasons. they want me to return the entire bonus pre-tax. so it turned out i'm 3600 short of that amount. i know i should've not signed that thing. but, is there any way i could refund that 3600 from uncle sam. and not feel bad 'bout what i got into. thanks..

Answer 1

There is no such thing as a bonus that has a condition attached to it (well tax wise at least). You are more than likely talking about a reimbursement. With that said we need to look at few more things.

Well, first you aren't out 3600 dollars. You should get credit for the tax withheld on your W2.

Now if you filed legal return (assuming it was last year) and the company is doing everything right. You should be able to amend your return and receive the entire $3600 dollars. If it is in the current year they should adjust your W2 for the repayment. However, if it was in a prior quarter it becomes harder for them to fix the amount of tax withheld. Not impossible just harder.

However, if the company truly paid you in the form of a bonus (thus withholding tax and Social security and medicare) then they are doing something illegal. It then becomes part of your wages and they can't put future limits on you for a bonus.

I am assuming that you have some paperwork on the transaction that shows what they withheld. I would suggest talking to a tax professional in your area (so they can read the actual paperwork).

And, I would suggest an Enrolled Agent with several years of experience...not a CPA.

Answer 2

You'll have to refund the entire $10k now. You'll get the other $3,600 back at tax time when you file your return. It will be on your W-2 from the employer as taxes withheld. However, Social Security and Medicare complicate that a bit.

If they withheld Social Security or Medicare from the bonus, they must refund that directly to you. Their next payroll return will be messy due to that, but there is a way to correct that type of "error" on subsequent 941s.

So, as it works out, you have to refund the $10k less any Social Security and Medicare taxes that were withheld. That would work out to $765 so the net repayment to the employer would be $9,235.

Answer 3

Unfortunately you signed an agreement, so you'll have to pay them what you owe. Sorry, I know thats not what you want to hear. Although if your reasons are deemed necessary, you may be able to get out from it, I would consult an attorney.