Hello,

I have a question about a sign on bonus I received in February, 2012. It was for 7,767.44 and after taxes I received a net of 5,000 dollars. I worked for the company for a few months, but now am leaving and actually paid back the $5,000 net bonus. I've since rec'd a letter from the company demanding that I also repay 2,767.44 in payroll taxes that were withheld. Must I return the taxes they withheld? Why can't they reverse the original transaction & file amended payroll tax returns to get the money they withheld + their employer's share back? At year-end the W-2 would not reflect the bonus, nor the taxes withheld (it would be just as if the whole thing never took place). I guess what I'm trying to say is they're going to have to amend their payroll tax reports anyway, therefore they essentially would be double-dipping, wouldn't they (getting me to pay for the taxes & then receiving it all back + their employer portion from IRS and state)? I noticed a similar question posted, but I also noticed that by the time the other poster returned his sign on bonus, a fiscal year had passed. Is this a different situation since I have only been there 2 months? Thanks!

What they did was gross up the bonus so you cleared $5K. And yes you have to pay that back. It has already been reported to the IRS and you should get a W2 for that money.