My employer notified me that I have to repay my bonus $6k after tax. The gross amount was $10k.

What is interesting is that they told me if I don't repay by their cutoff date for 2005 adjustments I will have to pay close to the entire amount per the IRS.

Can anyone point me to where in the code it states that? Why couldn't I just pay the net of tax amount after their cutoff date?

Please advise.

While I cannot cite the IRS regulations, what your employer is saying makes no sense.

Because you are repaying compensation, they should credit your salary for the taxes paid. That's general accounting principle.

Ask them for the specific IRS procedure memo title/number.