Hi

My employer paid me a sign-on bonus of $5K two months ago when I joined them. The employment contract says that I should return the money if I choose to leave the company within a year. I have decided to leave the company for personal reasons.

My question is that I was paid only $3117.50 after taxes. I am willing to repay that amount. But the company says that I need to give them back the entire $5000. Let me know if that is normal? Do I need to consider the taxes withheld to be my loss? Is there any chance I get the difference?

Also my company said that I could claim relocation expenses upto $4000. But I did not claim any relocation expenses? Do I still need to pay them the $4000?

Please advise!

Thanks,
DJ

IntlTax

The difference between the 5,000 and the 3,117 is mostly related to federal and state taxes that the employer withheld and paid over to the government on your behalf. As a result, when you file your tax returns you will be able to claim these amounts as tax payments against your tax.

For example, if you owe no tax for the year, then the entire amounts that your employer withheld and paid to the government will be refunded to you when you file your tax return.

I am not sure, but you might even be able to get a refund of the social security/medicare taxes that were withheld. Without looking at your pay stubs it is impossible to tell if there were other amounts that you will not get back. Generally though, your employer is right that you should pay the full amount (or likely something close to it).

If your employer did not pay you for any relocation expenses, then you should not have to reimburse the employer.

AtlantaTaxExpert

Good answers by IntlTax. I have nothing to add.