Question

Debt/Salary repayment to employer

Forum|Forum|4 years ago
March 15, 2022
1 reply
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I have previously submitted this question on 1/26/2022. Hoping an expert can provide some additional insight:

During 2021, I was required by my employer (US Federal Government) to repay two (2) retention bonuses. The bonuses were distributed in 2019 ($1,500 bonus - $1,289 after taxes) and in 2020 ($1,500 bonus, $1,287 after taxes). At the time of the payments I was unaware that I no longer qualified for the bonus. I repaid the bonus money back to the Fed. Gov't during 2021. Do I have the ability to deduct the $3,000 from my 2021 earnings since I was taxed on those funds as income during 2019 & 2020?

AmyC

Employee

You do have a right of repayment but you do not get to deduct the $3000 from earnings. If you itemize deductions, you can claim $3,000 there. If not, you will want to take a credit against your tax liability. Here are your options and how to do it, see What is a Claim of Right Repayment. See also example on page 36 of Pub 525. You will want to determine which is better for you, the credit or the deduction. If the credit is best, you will need to download the desktop version and move your .data file so you can pick right up where you left off. In addition, you may need to file Form 843 for Medicare and Social Security taxes to be refunded, also on page 36, third column.

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