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paying back a hiring bonus

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lenriques

Junior Member
What is the name of your state? CA

I signed a 12-month contract to work for the federal government. This included a hiring bonus, and it was stipulated in the contract that if I left before 12 months, I would have to pay back the bonus on a pro-rated rate. The bonus was paid to me in a lump sum, and taxes took out 40%. I have unexpectedly had to move to the opposite end of the state, and I need to quit or face a huge commute. My questions is this: Do I need to pay back the full pre-tax sum? I dont think it's fair to have to pay back money that I never actually got! It would make a $4000 difference! Thanks for any advice!
 


pattytx

Senior Member
Was the bonus paid last year? If so, and you pay back the gross amount, you should get a W-2C for the lowered taxable wages, plus a refund of FICA/Medicare taxes, if you sign a statement saying you will not apply for a refund of your portion. Regarding FIT, the employer can't give it back to you because they don't have it, they can't get it back, and you've already filed your 1040. When you get the W-2C you can file a 1040X and 540X and, if that's how it works out, get some, if not all, of the FIT/SIT back.
 

lenriques

Junior Member
The bonus was not paid last year - it was paid in 2006. Does that make a difference in paying back the gross vs. net amount?
 

pattytx

Senior Member
Yes, it does. In that case, they should require you pay back the net only. It's the same thing as if you had gotten the check and turned around and gave it back to them.
 

mitousmom

Member
You probably should check with your agency's personnel office or the Office of Personnel Management. If deductions other than for federal or state income tax were withheld from your bonus pay, you may have to cover them.
 

pattytx

Senior Member
That's true, but it's very unlikley. Hiring bonuses are normally paid right before or immediately after the employee's start date, at which time there are no benefit deductions to be taken; the employee hasn't been there long enough yet. And if it was paid further into the term of employment, there should not have been duplicate deductions (such as for insurance, for example) made anyway. I suppose there could be some exceptions, but, my experience is that it would be pretty rare.
 

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