I had received a sign-on bonus last year, so it appeared as an income last year and I have paid taxes on it. As I did not complete one year with the company I had to return my sign-on bonus this year. How do I claim already paid taxes?

You should get a credit against your 2006 salary for the returned bonus. Make sure your company's accounting department gives you that credit and refunds the withheld taxes.

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Originally Posted by AtlantaTaxExpert

You should get a credit against your 2006 salary for the returned bonus. Make sure your company's accounting department gives you that credit and refunds the withheld taxes.

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Why would the refund come from the company when the taxes were paid to the federal/state (although withheld by the company)? Wouldn't the company say that I would need to claim a credit in the subsequent year's taxes?

The company eventually WILL get a refund from the federal government, but YOU are entitled to a share of that refund.