Hi. I read this thread but realized it was a few years old, hence I'm restating my question which is similar.

I accepted a sign-on bonus from an employer in November 2008 and reported it as income from wages (form 1040A) for tax year 2008. As of November 2009, I am leaving this employer and need to pay back the sign-on bonus plus taxes. How will this affect my tax situation for 2009? Will I be able to claim the taxes I'm paying out of my pocket as a loss on the 2009 tax return? Thank you for the help.

The BEST way to handle this is to have the employer submit a W-2C to correct the taxable income, showing a debit from your 2008 wage for the payback of the sign-on bonus. With the W-2C, you can then amend the return for 2008 and claim a refund.

Otherwise, you would have to show the debit from your 2009 wage balance as reflected on your 2009 W-2.