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Bonus Payback
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Dontax44
Level 2
03-04-2020
01:22 PM
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Client received a sign on bonus in July 2017. Reported on his W-2 and income tax, social security and Medicare taxes were withheld from the bonus amount. The client left the employer shortly after being employed so that a significant portion of the bonus had to be repaid. As of November 2019 the bonus portion owing was fully repaid.
Do we ask the employer to issue a corrected W-2 (W-2C) for 2017 and amend the 2017 Form 1040 tax return?
Or do we report the payback amount on Schedule C for 2019?
If schedule C how does client recoup social security and Medicare taxes paid on full bonus amount?
Thanks.
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1 Comment 1
garman22
Level 13
03-04-2020
01:32 PM
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@Dontax44 wrote:
Client received a sign on bonus in July 2017. Reported on his W-2 and income tax, social security and Medicare taxes were withheld from the bonus amount. The client left the employer shortly after being employed so that a significant portion of the bonus had to be repaid. As of November 2019 the bonus portion owing was fully repaid.
Do we ask the employer to issue a corrected W-2 (W-2C) for 2017 and amend the 2017 Form 1040 tax return?
Or do we report the payback amount on Schedule C for 2019?
If schedule C how does client recoup social security and Medicare taxes paid on full bonus amount?
Thanks.
You want to research, Claim of Right - IRC Section 1341.
Both of your ways are incorrect.
