My previous company provided me with a relocation package worth ~$13k. I left the company less than 12 months in that new role and now owe that money back. However, since I paid income taxes on that money in 2014, I'm wondering if I can file a return for the income taxes paid in that year on this money I now owe back to the company.
You might be able to deduct the $13,000 as an unreimbursed job-related expense for the tax year in the year that you re-paid the money.
I would check with a CPA to explore your options.
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This is a very common problem Basically there are two methods:
#1 - If the amount was reported on W-2 as taxable income in 2014, then you deduct it as a miscellaneous itemized deduction on Schedule A on the return for the year in which you pay back the money (e.g. 2016),
#2 - Do a hypothetical recalculation of your 2014 tax return without the $13K, and figure out what the tax liability would be. Subtract this hypothetical tax liability from your actual 2014 tax liability. The difference is a tax credit. Then run your 2016 tax return, without the Sch.A deduction. Deduct the tax credit from your 2016 tax liability.
You can pick the method that produces a lower tax liability.
If you also paid social security and medicare on the $13K, you can ask your ex-employer to give you a refund of the excess payroll tax paid. If the ex-employer refuses, If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection. File a claim with the IRS for refund using Form 843.
Get a good tax preparer to help with the two with/without calculations.
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If they included it in your previous W-2 and you paid taxes on, they won’t get it back because it was considered your then compensation. If you are paying it back, perhaps, it was not included in your W-2 previously. It seems like the latter was the case. If so, you deducted it as unreimbursed employee expense subject to 2% limitation on schedule A. The information presented herein is for general purposes only. It is not intended to, and may not be construed as legal, tax or accounting advice. For specific advice, please consult a attorney in person. Good luck. Zaher Fallahi, Tax Attorney, CPA (California).
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