Monday, August 15, 2011

How to recoup overpaid taxes?

I received a signing bonus when I joined a company in 2009. Taxes were withheld at the time I received the bonus. The understanding was that if I chose to leave the company within 12 months, I would pay back the bonus. It did not work out and I left, so I repaid the gross amount of the bonus expecting to recoup the taxes via a tax refund in 2010. The company submitted the W2 with the total income, including the signing bonus and taxes withheld to the IRS and State Revenue office. They did not reduce the income by the amount of the signing bonus I paid back to them. I notified them of the mistake and they issued a correction to the W2. They reported the correct income, but they also reduced the amount withheld to the correct amount. The problem is that the incorrect amount is still in the U.S. and state treasuries. How do I report this on my tax return to recoup the taxes I overpaid? My concern is that since the employer corrected both the income and taxes withheld, I won't be able to prove that I overpaid taxes.

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