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  1. #1
    Join Date
    Mar 2015
    Posts
    4

    Default Re: Retention Bonus and Tax Refund

    Thanx IIworking for replying. Appreciate you taking time and answering my question. I checked the W2 form, and it doesn't include the pay for the first two weeks of December.

    Please help me getting below answers :-

    1. Am I entitled to pay any part of money back to them, since I never signed any agreement with them regarding Retention Bonus.
    2. Why are they asking me to pay the TAX money, and why I should claim it from IRS and pay them, Can't they do the same (Tell IRS, the money was deposited in error).
    3. What legal actions can my previous employer take, and what are my options.

  2. #2
    Join Date
    Jun 2013
    Posts
    551

    Default Re: Retention Bonus and Tax Refund

    Quote Quoting srj
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    1. Am I entitled to pay any part of money back to them, since I never signed any agreement with them regarding Retention Bonus.
    If they paid you in error, then you will be required to pay back any money that should not have been paid to you. If the money they paid you in error was the same amount that they later did not pay you that you were owed, then you should not owe anything else.

    Quote Quoting srj
    View Post
    2. Why are they asking me to pay the TAX money, and why I should claim it from IRS and pay them, Can't they do the same (Tell IRS, the money was deposited in error).
    They are asking you to pay it because they effectively paid it to you. If the total was $2000, and you recieved $1500 of that, and they withheld $500 for taxes, then they are still out $2000 overall.

    Quote Quoting srj
    View Post
    3. What legal actions can my previous employer take, and what are my options.
    They can sue, if they do sue you can provide evidence you do not owe money.

    For the sake of making everything clear. I am going to try to walk through this to make sure I understand what happened.

    Prior to the retention bonus you were paid normally
    You received in error the retention bonus equal to 2 weeks pay
    They continued to pay you properly until you left
    When you left they held your final paycheck also equal to two weeks pay, as repayment for the bonus.
    Now they demand you repay the withholding from that paycheck.

    As llworking stated who owes who what at this point depends on your W-2

    If your W-2 includes all of your regular pay and withholding plus the pay and withholding from the retention bonus, plus the pay and withholding from your last 2 weeks, then the company needs to issue a new W-2 and figure it out on their end.

    If your W-2 includes all of your regular pay and withholding plus the pay and withholding from the retention bonus, but does not include the pay or the with holding from the last 2 weeks then the situation should be settled, and essentially you were just paid early for the last 2 weeks. It was not handled properly, but the money all works out.

    If your W-2 includes all of your regular pay and withholding plus the pay and withholding from the retention bonus, and includes the withholding, but not the pay from the last 2 weeks, then they are correct, that you still owe the equivalent of the tax withholding. If they will accept just the Federal and State income tax, then you can send them the money they are asking for, as it should have been reflected that you overpaid, and you would have received it in your refund. Otherwise they need to handle it on their end, and issue a new W-2, however this will lead to you amending your return, and likely owing some of your refund back to the government.

  3. #3
    Join Date
    Mar 2015
    Posts
    4

    Default Re: Retention Bonus and Tax Refund

    Thanx Brownj12 - I think the second situation is what my case qualifies for :-

    If your W-2 includes all of your regular pay and withholding plus the pay and withholding from the retention bonus, but does not include the pay or the with holding from the last 2 weeks then the situation should be settled, and essentially you were just paid early for the last 2 weeks. It was not handled properly, but the money all works out.

    My W-2 includes all of my regular pay and withholding plus the pay and withholding from the retention bonus, but it doesn't include anything from last 2 weeks. And I think you are correct, They should think that I was paid 2 weeks salary (inclusive of my Leave accural etc) in advance.

    What I can see from my Dec -1st Pay cycle payslip is that there is no TAX. So they have withheld that money, am not sure why did they do that.


    Also to make clear. Lets say 8000$ was retention bonus what they processed, and after tax (which includes Federal, Stat TAX, Medicare, Socical Security), what got deposited in my account was lets say 4500 $, so tax amount was 3500$.
    They withheld my Dec Pay check which was 4500$ (in pay slip I don't see any TAX deducted), and they have subtracted retention to nullify it.

    Do you still think I owe them money, Kindly advise?

  4. #4
    Join Date
    Aug 2013
    Posts
    284

    Default Re: Retention Bonus and Tax Refund

    On the tax issue only, this is basically an overpayment. IRS rules are that if the repayment occurs in the same year as the overpayment, then it is paid net of taxes and the employer adjusts the tax deposit. If instead the overpayment is repaid in the following year(s), the payment is made gross (including taxes) and the employee gets the refund from IRS. Agreed the W2 needs to be corrected by the employer if it includes the overpayment.

    State law says whatever state law says. Often it follow IRS but not always.

    Not the question but so-called "conditional wage payments" (what we see here) are not directly addressed in the IRC, but treating them as an overpayment is not optimal. There is some advantage to formally structuring the payment as a loan, the conditionally forgiving the loan at a later date.

  5. #5
    Join Date
    Mar 2015
    Posts
    4

    Default Re: Retention Bonus and Tax Refund

    Can anyone help please on this matter.

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