I received $11,500 in sign-on bonuses with a company in 2006. Now in 2008 I have to pay that back plus 8% interest per year. I am wondering how I can recoup the money I paid in taxes on the bonuses. Please also note that in 2005 my husband and my income was around $73,000. In 2008 I believe it will be around $170,000. Would it be better to amend the 2005 taxes or claim it in 2008? Or do I even have a choice? Thank you in advance to whomever responds.

You received sign-on bonus in 2006, so it is income in 2006. You are returning sign-on bonus in 2008, so it is negative income in 2008, so must be on your 2008 tax return.