Hello everyone! Can someone please help understand this?
I'm just going to post the entire email because it's self explanatory:
Email starts:
___________________________________________________________
As you are aware, in 2025 you received an $7,000, 24-month bonus while employed at
<name of the employer>. A condition of this bonus required that you remain
in the same FTE status at time of signing for 24-months. Your October 6, 2025 termination
date falls short of that commitment date, requiring the bonus to be repaid to NCH in full.
According to IRS Regulations, when a bonus repayment is within the same tax year, the net
amount of the bonus is required to be repaid. As this is the case with your repayment, you
will be required to send <us> the net amount of $4,629.50. If this balance is not repaid with
in 2025 and we enter the new tax year, per IRS Regulations the gross amount of $7,000
becomes due. This payment can be made via a personal check or money order made
payable to <name of the employer>. The payment should be mailed/delivered to:
Attn: HR Payroll/ Human Resources, xyz, ABC, OH 43205
Please feel free to contact us directly with any questions you may have or if you would like
to discuss the repayment of this bonus. Please make arrangements ASAP to avoid further
action through collections, legal, and credit bureaus. Thank you in advance for your prompt
attention to this matter.
____________________________________________________________________________________________________
End of email
The offer letter explained the amount distribution as such:
________________________________________________________________________________________
"We will also be offering you $3,000.00 sign on bonus to cover for your travel the
week of training and a $4,000.00 sign on bonus."
__________________________________________________________________________________________
My friend is trying to understand, why would they owe 7000 next year?
Edit: Thank you for the feedback. I've forwarded the link to the concerned person.
X-Employer is clawing back "tax deducted sign-on" bonus to be returned before end of financial year or pay the full amount next year.
byu/FatalisticFuturist intax
Posted by FatalisticFuturist
2 Comments
When they got that 7000 bonus, 2370.50 of it went to the government for tax withholding, and 4629.50 of it went to your friend.
If they pay it back this year, the employer will deal with getting back the taxes that were sent to the government on their behalf for the bonus tax withholding.
If they wait to pay it back until next year, the employer can’t get that withholding back from the government, so the friend has to pay the 7000 to the employer, and then try to get the other 2370.50 back from the goverment.
It’s much easier to pay it back this year than to deal with that.
I feel like you have gotten some good advice. Just as an add on, if your friend waits until next year, they would have to pay back the full $7,000 and then have to do a “Claims of right repayment” to get the taxes that the employer paid to the govenment on your friend’s behalf. It is much much easier to pay it back this year than deal with the government and calculate your credit.