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Old 04-04-2011, 11:37 AM
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Join Date: Apr 2011
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Reimburse Sign on Bonus

I have a new employee that I am trying to reimburse for the repayment of his Sign on bonus with his last company. He is only being asked to pay back his net amount. Is this something that I HAVE to run thru payroll in order to show it as income even though he has already paid taxes on it? OR, can i run it thru on his expense report? This is an odd circumstance and I am at a loss. I just want to do the right thing.
I have never had to pay back ANOTHER company's sign on bonus
Please help....we are in Texas.
Thanks!!



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Old 04-04-2011, 09:53 PM
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Join Date: Oct 2010
Posts: 5,231
“Is this something that I HAVE to run thru payroll in order to show it as income even though he has already paid taxes on it? OR, can i run it thru on his expense report?”----> His former employer paid him the bonus directly, it would have gone through their payroll. With the bonus going through payroll, it would have been subject to withholding. The employer withheld Federal income tax, state income tax, Social Security tax and Medicare tax. Social Security (6.2%) and Medicare (1.45%) make up the 7.65%. The point I'm trying to make is your EE would have been paying these taxes no matter how the bonus was paid to him. It is a one-time payment. You, as an ER, do not add that extra compensation to the company’s bottom line as a recurring annual expense. However, I guess as long as you return the money for your new EE, you can claim it as an expense in 2011 or have the company issue him a corrected W-2.
“ OR, can i run it thru on his expense report? “--->Whether certain amounts an employer pays as bonuses for signing or ratifying a contract are wages for purposes of the Federal Insurance Contributions Act (FICA), the Federal Unemployment Tax Act (FUTA), and the Collection of Income Tax at Source.I guess you do not have to withhold FICA Taxes from the reimbursed bonus tot he former ER.



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