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QUESTION DETAIL
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I was paid a $10,000 signing bonus contingent upon staying at a company for three years. If I leave the company early, I must pay back the bonus. If I do so, can I get the tax I paid on the bonus back? I will owe the company $10,000, but the check I received was only about $6,000.
ANSWER
Expert Barbara Blacklidge's Answer:
You most certainly can get the tax back that you paid on the bonus you received. You have two choices:
You can take a miscellaneous itemized deduction, on line 28 of schedule A (not subject to the 2% of AGI threshold) OR you can take a credit. The credit is computed by re-figuring the tax return from the previous year as if the income had not been received. Then the difference in tax is claimed as a credit on the current year's return. You have the option of choosing whatever method gives you the better benefit.
Please let me know if you require further information or clarification.
Thank you and best regards,
Barb
References: IRC Section 1341 for repayments & IRS Publication 525