Originally Posted by ADent
My wife received a signing bonus in 2011 when she took a new job. Since she ended up leaving that job in 2013 before the 2 year term of her agreement was complete, we had to pay that money back to the company. I'm not sure how to handle that on our 2013 return. Since we recorded it as income back in 2011, do we need to amend that return, or do we need to fill out some specific form for 2013?
Any help would be appreciated. Thanks!
Edit: Realized I put 2012 in the subject, but it should be 2011
In general, the bonus needs to be reported on her W2 as an EE, NOT on 1099. (This is not your case I guessHowever, IF she gets a 1099 in 2011 for that bonus and reports it on her 2011 tax return, paying income tax and self-employment tax on Sch SE.). You are considered as having received that money. You will not be able to get back the SS or medicare, unless your total salary for the year exceeds the $106,800 for 2011 maximum.If you have that documentation, you will report the fed tax withheld from the bonus as withholding on your 2011 return.
If you pay back the money in 2013, you'll claim the credit or deduction for the payback on your 2013 return. You didn't really pay back the taxes in 2013. What you paid back was the tax allowance the company gave you. You can't get that back from the IRS or SSA.
so, if you repaid amounts reported as income in 2011,if the amount is $3k or less, it is a miscellaneous itemized deduction subject to the 2% limitation on Sch A. if the amount is more than $K, it is a miscellaneous itemized deduction which is not subject to the 2% limitation.