Paying back signing bonus: UPDATE...

[Ph33zy]

I recently accepted a job that gave a $5000 signing bonus. 1 month into the job, I realize that the position is not for me and am going to move on. I know that I have to pay back the signing bonus but I only received $2700 after tax.

Do I have to pay back the $2700 or the entire $5000? I know my new company is giving me $5000 to pay back my old company, but that will also be taxed.

Does anyone have any experience with a similar situation?


UPDATE:

Okay, so its my last week.... and it seems like my company issued my bonus in 2007 since it showed up on my 2007 W2's. I now have to pay back the company the full 5000 since they submitted my earnings to the IRS already, which is fine.

I asked them if it should be reflected in my 2008 W2's and they said NO. Does this make sense???? My 2007 W2 will report that I made $5000 more. Shouldn't my W2 for 2008 reflect that I made $5000 less?

 

[duragezic]

Sorry I have no advice but damn that tax is wicked. I was hoping I might see $2000 of my $3000 signing bonus, but looks like it'll be even less than that. I thought it might be similar to taxes out of my paycheck which I estimated to be about 30%.

 

[LikeLinus]

I know bonuses are taxed in the highest tax bracket (35%). You should have gotten $3250, not $2600. Something is off about your numbers.

 

[smack Down]

If it was still in the same year you would only need to pay back after tax. If it is a new year you have to payback all the money and get an updated W2 stating the new income level. You will then get the tax money back when you file.

 

[bsobel]

Originally posted by: Ph33zy
I recently accepted a job that gave a $5000 signing bonus. 1 month into the job, I realize that the position is not for me and am going to move on. I know that I have to pay back the signing bonus but I only received $2600 after tax.

Do I have to pay back the $2600 or the entire $5000? I know my new company is giving me $5000 to pay back my old company, but that will also be taxed.

Does anyone have any experience with a similar situation?

So you got 5k, wound up with 2.6k after taxes. Now your getting another 5k (we can presume similar taxes) so you wind up with 5.2k and owe 5k (worst case, and its probably the full amount sans SSI and Medicare).

Now, more to the point, what did your contract say?

 

[bsobel]

Originally posted by: LikeLinus
I know bonuses are taxed in the highest tax bracket (35%). You should have gotten $3250, not $2600. Something is off about your numbers.

Did you consider the 9.3% state tax he's paying as well?

 

[LikeLinus]

Originally posted by: bsobel

Originally posted by: LikeLinus
I know bonuses are taxed in the highest tax bracket (35%). You should have gotten $3250, not $2600. Something is off about your numbers.

Did you consider the 9.3% state tax he's paying as well?

No, I live in a state without a state income tax and didn't factor that in. It should have come out to $2785 with the 9.3% additional tax.

 

[bsobel]

Originally posted by: LikeLinus

Originally posted by: bsobel

Originally posted by: LikeLinus
I know bonuses are taxed in the highest tax bracket (35%). You should have gotten $3250, not $2600. Something is off about your numbers.

Did you consider the 9.3% state tax he's paying as well?

No, I live in a state without a state income tax and didn't factor that in. It should have come out to $2785 with the 9.3% additional tax.

And dont forget state long term disability insurance Either way 2785/2600 is well within the ballpark.

 

[LikeLinus]

Originally posted by: bsobel

Originally posted by: LikeLinus

Originally posted by: bsobel

Originally posted by: LikeLinus
I know bonuses are taxed in the highest tax bracket (35%). You should have gotten $3250, not $2600. Something is off about your numbers.

Did you consider the 9.3% state tax he's paying as well?

No, I live in a state without a state income tax and didn't factor that in. It should have come out to $2785 with the 9.3% additional tax.

And dont forget state long term disability insurance Either way 2785/2600 is well within the ballpark.

Yeah I figured he was ballparking it, but it seemed low because my bonuses only have the 35% taken out.

 

[RichieZ]

na

 

[Gunslinger08]

Originally posted by: LikeLinus

Originally posted by: bsobel

Originally posted by: LikeLinus
I know bonuses are taxed in the highest tax bracket (35%). You should have gotten $3250, not $2600. Something is off about your numbers.

Did you consider the 9.3% state tax he's paying as well?

No, I live in a state without a state income tax and didn't factor that in. It should have come out to $2785 with the 9.3% additional tax.

Some cities also charge income tax.

 

[Reel]

That would probably be a question for the HR or payroll department because policies on this can vary by company. I have read accounts of people being required to pay back the full bonus paid out to them regardless of taxes, some being required to pay back the post tax amount. I would be prepared to owe at least $5000 to the former employer. However, if I remember correctly, there are tax implications in paying back the bonus to your benefit. Disclaimer: I am not experienced in any of these cases or tax code details. I am merely providing second hand accounts from memories.

Good luck.

 

[Ph33zy]

I live in Southern California so I have state tax as well and yes I was just estimating. I can't remember the exact numbers but it was close to half of the bonus. Contract says that I have to pay back the bonus if I leave less than a year but wasn't very specific whether it was gross or net pay.

 

[Greenman]

It seems to me that you would have to pay back the full 5k, that's the amount the company laid out. The taxes you would have to get back from the IRS at the end of the year, since they are the kind folks that took it from you.

Note: Talking off the top of my head, I'm not a tax expert or even an accountant.

 

[Jumpem]

Iwould imagine the entire $5k, as that's what the company did pay out, regardless of taxes.

That said, when I got my relocation bonus, the HR lady added several thousand to it to offset the taxes. So I got a check for the actual amount of the bonus.

 

[Ph33zy]

Okay, so its my last week.... and it seems like my company issued my bonus in 2007 since it showed up on my 2007 W2's. I now have to pay back the company the full 5000. I asked them if it should be reflected in my 2008 W2's and they said NO. Does this make sense???? My 2007 W2 will report that I made $5000 more. Shouldn't my W2 for 2008 reflect that I made $5000 less?

 

[FoBoT]

you have to pay them what they paid out, it isn't their fault you got taxed
you pay $5000

if you only have to stay 12 months to avoid the payback, i'd tough it out vs. paying that much back

 

[Ph33zy]

I only started a month and I knew right away that it wasn't worth staying there. I felt like I was doing a mindless job. I am not questioning paying them back the full amount. I am just wondering if I just totally lose out on $2300 or if there's any way I can get that back from the government and why it wouldn't be reflected in my W2s for next year from the company.

 

[JS80]

Originally posted by: LikeLinus
I know bonuses are taxed in the highest tax bracket (35%). You should have gotten $3250, not $2600. Something is off about your numbers.

9.3% CA income tax.

 

[BrownTown]

What company btw?

I just randomly ask because I recently accepted a job with the exact same signing bonus and repayment terms, but they sound like pretty generic numbers, so its probably not related.

 

[Ph33zy]

Originally posted by: BrownTown
What company btw?

I just randomly ask because I recently accepted a job with the exact same signing bonus and repayment terms, but they sound like pretty generic numbers, so its probably not related.

Broadcom Corp.

 

[jmcoreymv]

You'd probably want to ask in one of the tax threads, but shouldnt they issue you a corrected W2 for 2007 so that you can refile?

 

[mugs]

Sounds like you screwed yourself there. But if your new job makes you happier and/or pays you more, $2400 is a small price to pay.

And BTW, bonuses are usually WITHHELD at the highest tax rate, but they are taxed like any other income. If this is your first job out of college and you didn't make a lot of money last year, you may get a lot of that money back.

 

[Reel]

Originally posted by: Ph33zy
Okay, so its my last week.... and it seems like my company issued my bonus in 2007 since it showed up on my 2007 W2's. I now have to pay back the company the full 5000. I asked them if it should be reflected in my 2008 W2's and they said NO. Does this make sense???? My 2007 W2 will report that I made $5000 more. Shouldn't my W2 for 2008 reflect that I made $5000 less?

See disclaimer above. My intuition says you should expect to adjust your 2007 income not your 2008 income. You are effectively returning income from 2007 not losing money in 2008 if that makes any sense. If I am right, that might be something you could handle in your 2007 tax form before sending it in.

 

[Ph33zy]

Originally posted by: mugs
Sounds like you screwed yourself there. But if your new job makes you happier and/or pays you more, $2400 is a small price to pay. Although I am regretting the Dec 17th start date now. I'm still kickin myself for not starting in January - it woulda been a lot easier to deal with this mess.

And BTW, bonuses are usually WITHHELD at the highest tax rate, but they are taxed like any other income. If this is your first job out of college and you didn't make a lot of money last year, you may get a lot of that money back.

$2400 is definitely a small price to pay for my happiness- there was no way I was going to be sticking it out for another 11 months. I've been out of college for about 5 years now so, I'm not sure how much I'll get back.