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MannyN · Nov 30, 2010, 08:28 PM

I have received relocation *** commute expense 10K ( got check for 6800 only) in November 2010 but if I leave the company within one year, I have to repay the full amount.. For some personal reasons I will have to leave the company in Jan 2011. Will I have to repay full 10K OR $6800 to company?

If I have to pay full 10K, Now how do I get back withholdings of 2200 from Federal, FICA & Medicare ?

OR Is it better option to leave the company in Dec 2010 itself to get the taxes straight?

Thanks
NM

ebaines · Dec 1, 2010, 07:28 AM

Typically when given a signing or relocation bonus like this you must return the entire amount if you fail to meet your obligation - that's the only way for the employer to come out whole. So in this case you would have to return the full $10K. The amount that was withhheld is not entirely gone - it is being held by the government in anticiaptaion of taxes you may owe. If you return the $10K in 2010 (either by check or by accepting a deduction from your December salary), your employer should be able to report your actual wages paid for the full year on your W2 as not including the $10K (but you should ratify this with them first). The result would be that you have over-paid withholding taxes, and you get a nice refund when you file your tax return in in early 2011. From a tax filing perspective this would be the easiest route - IF your employer can indeed report your 2010 wages as not including the $10K.

If you wait until 2011, your 2010 wages will include the $10K, so the withholdong that was taken out goes to pay your taxes on the bonus you received. When you return the $10K in 2011 the company can not issiue you a "negative" W2, so you never get all that withholding back. Your only recourse is on your 2011 taxes to list the $10K you paid back in 2011 as a deductible business expense, but that deduction is limited to the portion that exceeds 2% of your adjusted gross income for 2011, so you may not be able to deduct it all. You also may have an issue with state income taxes which you may not be able to get all back either. And finally the social security and FICA taxes that were deducted can't ever be reimbursed to you. Bottom line is: because you are breaking your agreement with your employer it will most likely cost you something.