Let's say you receive a $50,000 bonus from a brokerage for bringing your assets there for 2 years, but you subsequently decide to leave and they claw back the payment.
The brokerage says that the bonus will be reported as interest on a 1099-INT (which is reported to the IRS), whereas the clawback will be only be included under "Fees & Expenses - Other Expenses" on the supplemental information section (which is not reported to the IRS). They say that this will be the case even if the clawback occurs in the same year as the original payment.
Two questions here:
1. In the event that you decide to leave in the same year that the bonus was paid, does anyone have any idea how best to report this on the tax return? From what I read, the bonus really doesn't even need to be included in the taxes in this case. However, that seems likely to cause problems, because the brokerage will still report the bonus per the above.
2. In the event that you decide to leave in the year after the bonus was paid, are you eligible for tax relief in that instance (for the tax you paid on the bonus), and if so then through what channel? Is it eligible for "claim of right refund", or does that fail because you did not appear to have an unrestricted right at the time the bonus was received, given the two year holding period? (And, if the latter, wouldn't that mean that the bonus shouldn't actually be included as income in the year it was paid out?)
I recognize these are complex questions and will ask an advisor as well but welcome any contributions anyone can make here.
The brokerage says that the bonus will be reported as interest on a 1099-INT (which is reported to the IRS), whereas the clawback will be only be included under "Fees & Expenses - Other Expenses" on the supplemental information section (which is not reported to the IRS). They say that this will be the case even if the clawback occurs in the same year as the original payment.
Two questions here:
1. In the event that you decide to leave in the same year that the bonus was paid, does anyone have any idea how best to report this on the tax return? From what I read, the bonus really doesn't even need to be included in the taxes in this case. However, that seems likely to cause problems, because the brokerage will still report the bonus per the above.
2. In the event that you decide to leave in the year after the bonus was paid, are you eligible for tax relief in that instance (for the tax you paid on the bonus), and if so then through what channel? Is it eligible for "claim of right refund", or does that fail because you did not appear to have an unrestricted right at the time the bonus was received, given the two year holding period? (And, if the latter, wouldn't that mean that the bonus shouldn't actually be included as income in the year it was paid out?)
I recognize these are complex questions and will ask an advisor as well but welcome any contributions anyone can make here.
Statistics: Posted by johnanglemen — Sun Dec 15, 2024 11:48 pm — Replies 6 — Views 501