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Sign On Bonus Woes

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grichard79

Junior Member
What is the name of your state? --Mass. (but the question stems from a time when I lived in Virginia).

In 2004, I received a $2000 sign on bonus from an employer. I was to begin working for the employer in 2006 after completing another training program. The employer reported the bonus on a 1099-Misc in box 7 in 2004, meaining I paid additional self-employment tax on the amount (and, of course, it was treated as part of my taxable income). One year later, in 2005, I decided I wanted to take a different job, so I returned the $2000 to my employer.

Now that the dust has settled and I have time to think about it, I would like to recoup the taxes I paid on the money if possible. The way I figure it, I paid around $600 more in taxes in 2004 b/c of the amount.

I've thought about just filing a 1040X and explaining what happened there, but I wanted to see if anyone has any insight as to 1) should I amend 2004 for this (or should it be addressed in 2005, the year I returned it) 2) do I need to involve the company who paid the 2000 and issued the 1099-misc, or should I go it on my own).

Any advice on this thorny issue would be greatly appreciated.
 


LdiJ

Senior Member
What is the name of your state? --Mass. (but the question stems from a time when I lived in Virginia).

In 2004, I received a $2000 sign on bonus from an employer. I was to begin working for the employer in 2006 after completing another training program. The employer reported the bonus on a 1099-Misc in box 7 in 2004, meaining I paid additional self-employment tax on the amount (and, of course, it was treated as part of my taxable income). One year later, in 2005, I decided I wanted to take a different job, so I returned the $2000 to my employer.

Now that the dust has settled and I have time to think about it, I would like to recoup the taxes I paid on the money if possible. The way I figure it, I paid around $600 more in taxes in 2004 b/c of the amount.

I've thought about just filing a 1040X and explaining what happened there, but I wanted to see if anyone has any insight as to 1) should I amend 2004 for this (or should it be addressed in 2005, the year I returned it) 2) do I need to involve the company who paid the 2000 and issued the 1099-misc, or should I go it on my own).

Any advice on this thorny issue would be greatly appreciated.
The only way that I can think of to ensure that you get back the self employment taxes would be to amend 2004. However, since you paid back the money in 2005, that generally wouldn't be the proper way to do it.

Hopefully someone else will comment who has had to deal with that particular issue.
 

grichard79

Junior Member
Thanks

I'm going to wait and see if anyone has more specific advice. If they do not, I might just try amending 2004. I'll explain what happened in detail on 1040X. I mean, if the IRS does not see this as the right solution, they'll reject my amendment, right? Then, I could just try another route. If everything I tell them on the form is true, I don't think it will be an issue. Please let me know if you see any other reason to be wary, though.
 

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