paying back a signing bonus

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KittenKnows

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I recently signed to join a group and they gave me a $10,000 signing bonus, minus 40% to the feds in taxes. My contract says I have to work for them for 2 yrs or else pay back the bonus. I have now decided not to work for this group and will have to pay back the bonus. They will be hitting me with the full $10,000 but $4000 of this was already given to the feds in taxes. What am I supposed to do about this from a tax standpoint? Do I write off the $4000 that was given to the feds for a bonus that I ultimately didn't end up getting? This is a mess but I can't stay with this group for 2 yrs, so now I need advice...:confused:

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I have no idea. Hopefully there's a tax expert or an accountant you can talk to about this. It would be a little sad to part with $4,000. But is $4,000 worth the misery of staying with your current practice group?

Curious minds want to know, why do you want to leave the group? Is there a lesson here for other future docs from your situation?
 
I've been in this position before. You generally have to pay them back the full $10,000 (if you signed THIS year, the employer might be willing to work with you and get back that $4000 from the IRS, but that is totally at their discretion -- from a legal standpoint, YOU are responsible for making them whole by returning the $10k to them) but you will be able to get the $4,000 back from the IRS when you file your return for the year.
 
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concur -- I have large-firm experience in this area; for large firms, they generally will not pursue bonus repayment very vigorously from a departing employee -- not worth the firm's while to pay an attorney a couple thousand $$, and potentially get a bad name, in order to try to get repaid. If the firm did something bad/unethical and you decided to leave despite the contract that says you must repay the 10K... some people may elect to repay, others may not. It is very unlikely that the firm would turn you down if you offered to repay 8K immediately rather than 10K, possibly, at some point way down the road.

Note 2 -- the 4K paid toward taxes is not really relevant, other than as it impacts your short-term cash liquidity -- there are tax requirements regarding bonuses and federal withholding tax on bonuses paid, but if you are paid 10K and then have 4K of taxes withheld (this counts as 10K income), and then have to return the 10K (returning the 10K will reduce your taxable income by 10K), you will not be responsible for the 4K taxes that were withheld, as there is no longer a net increase in taxable income of 10K because the full amount was returned. You'll get the full 4K back at the end of the year when you file taxes. Alternately, you can increase your deductions for the rest of the year so that less is taken out; the benefit of this is that if you can reduce taxes paid by, say, $500 per month for 6 months, instead of waiting until you file taxes to get the $4K back, you've already gotten $500 * 6 or $3,000 in your pocket due to lower taxes paid in the current year, and will get the other $1,000 back when you file taxes the next year.
 
Very informative thread! I'm lucky to come upon it because I am also in a similar situation. I've been getting some pay advances by my present employer and unfortunately my collections did not match those advances. I now owe the difference since I am relocating to another practice. Taxes were witheld with those pay advances and it seems clear from the above posts that I will get it back when I file at the end of the year. I wonder though about FICA and Medicare witholdings. As far as you know is there a way that money gets accounted for?

Nardo
 
Very informative thread! I'm lucky to come upon it because I am also in a similar situation. I've been getting some pay advances by my present employer and unfortunately my collections did not match those advances. I now owe the difference since I am relocating to another practice. Taxes were witheld with those pay advances and it seems clear from the above posts that I will get it back when I file at the end of the year. I wonder though about FICA and Medicare witholdings. As far as you know is there a way that money gets accounted for?

Nardo
It is pretty easy to get back excess FICA when you file your Federal taxes, but I'm not sure about medicare. The best thing to do would be to work with your current (previous?) employer to reverse those withholdings (which should be pretty easy if the advance and the payback both occur during the same tax year.)
 
Can't you file an amended tax return to get back taxes from IRS?
 
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