Repayment of Signing Bonus; deduction?

[pwauburn]

What is the name of your state (only U.S. law)? Alabama.

Last year (2007), I took a job in Arizona and was given a $2500 sign on bonus, and $5000 for moving expenses. If I left the job prior to 18 months of employment, then I had to pay most of it back. I did leave the job early, and moved to Alabama. I started repayment last Feb, and stopped payments in July. I payed back a total of $5500. Can that money be deducted from my yearly income for 2008, for the purpose of lowering my Modified Adjusted Gross Income?

The details of the money is a bit confusing. I was allowed $5000 for moving expenses, and anything that I didn't use was then added to my signing bonus. I can't recall the exact figures, but I do have it written down someplace if that is important. I paid income tax on that money last year (2007).

My confusion comes from the fact that the initial signing bonus was income for 2007, but my repayment was in 2008. Suggestions?

Thanks.What is the name of your state (only U.S. law)?

[davew128]

It is a deduction but you should consult the 1040 instructions as to what line it goes on. I believe it is a negative entry under other income but consult the instructions to be sure.

[tranquility]

From the top of my head, this would be a miscellaneous deduction (subject to 2%) of code section 67(b)(9):

(9) the deduction under section 1341 (relating to computation of tax where taxpayer restores substantial amount held under claim of right)

Which really sucks. Sorry, but at least I'm not sure. See a tax professional to be sure.

[davew128]

I went and looked it up. If under $3,000 its an itemized deduction NOT subject to 2% and if over $3,000 can either deduct the amount or take a credit for the additional tax paid on the income in the prior year.

[pwauburn]

I really appreciate the help guys.

Few more questions just to clarify some things. As I stated, I received $2500 as a signing bonus. Then there was another $5000 that I received which was for moving expenses, and anything that I didn't use for moving expenses was simply added to my signing bonus. Of that $5000, I used $2868 for actual moving, and therefore that was non-taxable due to it being a reimbursement. The remaining 2131.52 (of the $5000) was taxed.

So, all total:
taxable bonus = $4631.52.
non-taxable moving expense reimbursement = $ 2868.48

Total bonus + moving reimbursement = $7500

I repaid $5500 of the $7500.

When deducting the $5500 for this year, it doesn't matter what part of that $7500 that I am deducting does it? Meaning that I don't need to clarify if the part that I am deducting is the taxable vs. the non-taxable from last year?

Also, what do you guys mean when you say (subject to 2%)? Since the amount is over $3000, and I plan to deduct the amount, how does the 2% translate?

I apologize for asking all of these questions. I do have a B.B.A, but it is not in accounting and I no longer work in business so I am a bit hesitant to handle all of this myself without getting some second opinions. It is pretty fun though

[tranquility]

I still haven't looked it up and will have to trust dave128 there is a special rule or statute for the matter. However, as to one of your questions, if you have a miscellaneous deduction taken on schedule A, it is said to be subject to a 2% floor. That means that the total of all your miscellaneous deductions must exceed 2% of your AGI in order to deduct anything. Then, you only deduct the amount which exceeds.

[pwauburn]

Is it possible to include this deduction in the Modified Adjusted Gross Income?

I need to get my MAGI down in order to be able to deduct the student loan interest that I paid over the year 2008.

If this can not be deducted from MAGI, any suggestions on how to get it down?

I did move houses over the year, and I do meet the "moving expense" deduction rules. However, my dad and myself did the actual moving. I've added up the mileage, cost of trailer rental, etc... Can I also add in the average $hourly/wage for a "moving person", even though I only paid my dad in food and love?

[efflandt]

Here is the URL that explains repayments in IRS Publication 525 [url=http://www.irs.gov/publications/p525/ar02.html#en_US_publink100098573]Publication 525 (2008), Taxable and Nontaxable Income[/url]

The amount for figuring the deduction is likely the $4631.52 that was taxed previously, not the amount that was already deducted (you cannot deduct income twice).

But you also may owe tax for deducting moving expenses, if you did not work in AZ for at least 39 weeks (see IRS Publication 521) [url=http://www.irs.gov/publications/p521/ar02.html#en_US_publink100043375]Publication 521 (2008), Moving Expenses[/url]

[tranquility]

Thanks for the publication posting effandt. I always get into the code and regs first and sometimes it's hard to get a quick answer. I've got to start looking at the pubs and instructions first, it certainly makes things easier.

(At least I got the code section right.) It looks like you can deduct the amount on Schedule A as a miscellaneous deduction, or if over $3000, you can either do that or make the tax paid calculation and take it as a payment. Neither will change your MAGI the way you want to.

No. You cannot add in the average moving guy cost to you or your father's work.

[pwauburn]

Ok, I've done all of the 2008 forms for my taxes. I really appreciate the help.

Last question before I go, I moved back from Arizona in Dec. 07 and after checking my taxes for last year I realized that I did not adjust it for those moving expenses. Since I met the "time" requirement during the 2008 year, I am going to amend the 2007 tax return to show those moving expenses.

Does that just involve using Form 1040X and Form 3903?

[tranquility]

You only need to send in the portions of the return which are changed. You may send in the whole return if you like.

[davew128]

Tranquility, I just want to clarify that this deduction is NOT subject to 2% of AGI.

[tranquility]

Agreed. Under $3,000 line 23, over $3,000 line 28 of schedule A.