I'm going through something very similar right now and this thread has been incredibly helpful! My company laid me off after 4 months and is demanding repayment of my $5,000 signing bonus. Like others have mentioned, they initially wanted the full gross amount even though it's the same tax year. One thing I'd add is to check if your state has any additional protections. I'm in California and discovered that there are some state-specific rules about wage deductions that can provide extra leverage when negotiating with employers. It might be worth doing a quick search for "[your state] wage repayment laws" or consulting with an employment attorney if the amount is significant enough. Also, for anyone dealing with this situation - don't be afraid to push back professionally. These companies often rely on employees not understanding their rights or being too intimidated to question the repayment terms. You're already dealing with the stress of a layoff; don't let them take advantage of you financially on top of that. The advice about getting everything in writing and involving payroll/accounting (not just HR) is spot on. HR departments sometimes don't fully understand the tax implications, but payroll people usually do.

I went through this exact situation about 8 months ago and wanted to share what worked for me. Got laid off 4 months into a new job with a $7,500 signing bonus that had to be repaid. The key breakthrough came when I found my original employment agreement and realized it didn't specifically state whether repayment should be gross or net. I then printed out my pay stub showing the bonus payment with all the tax withholdings clearly itemized ($1,875 in federal taxes, $450 state, plus FICA). I scheduled a meeting with HR and brought both documents. I explained that since I received the bonus in February and was being laid off in June (same tax year), standard payroll practices require that I only repay what I actually received after taxes. I pointed out that asking me to repay $7,500 when I only got $5,175 after withholdings would mean I'm paying $1,875 in federal taxes on money I'm giving back to them. The HR person initially resisted, but when I asked them to check with their payroll department, they came back the next day confirming I only needed to repay the net amount. Make sure you stay calm but persistent - you're not asking for a favor, you're asking for the correct calculation based on tax law. Document everything and don't let them rush you into paying the wrong amount just to meet their arbitrary deadline.

I went through this exact same thing last year with my vacation payout! That 48.5% withholding rate is brutal but totally normal - it's what happens when employers use the aggregate method for supplemental wages. Basically their payroll system freaks out and thinks you're suddenly making that lump sum every single paycheck for the whole year. The silver lining is that this is just withholding, not your actual tax liability. When I filed my taxes, I got back about $2,800 of the $3,600 they over-withheld from my vacation payout. The actual tax rate on that income ended up being much closer to my normal bracket. One thing that really helped me was immediately scanning and saving multiple copies of that pay stub - you'll definitely need those withholding details when you file. Also, I adjusted my W-4 at my new job to reduce regular withholding by about $150 per paycheck, which helped with cash flow while waiting for tax season. Just make sure to be conservative with any W-4 adjustments so you don't accidentally underwithhold for the year. It's frustrating having so much of your money tied up until you file, but you should get most of it back!

I'm dealing with the exact same situation right now! Just left my company with about 520 hours of banked vacation time (I know, I know - should have used more of it during COVID). They hit me with 47% withholding and I was convinced there was some kind of error. Reading through everyone's explanations about the aggregate method has been such a huge relief. I had no idea that payroll systems could be so dramatic - treating my one-time vacation payout like I'm suddenly earning that amount every two weeks for the entire year seems completely ridiculous, but at least now I understand what's happening. I'm definitely going to follow the advice here about keeping multiple copies of my pay stub and being conservative with any W-4 adjustments at my new job. It's frustrating having thousands of dollars tied up until tax season, but knowing that most of you got back 75-85% of the over-withheld amount gives me hope. Thanks to everyone who shared their actual numbers and experiences - this community has been way more helpful than trying to navigate the IRS website or sitting on hold for hours!

As a newcomer to this community, I'm amazed by the depth of knowledge shared here about partnership taxation! Reading through this discussion has been incredibly educational, especially since I'm considering a similar transition from employee to partner at my workplace. The consensus seems clear that dual W-2/K-1 income from the same partnership is absolutely legal and common, despite some preparers' misconceptions. What strikes me most is how many experienced professionals have faced identical resistance from tax preparers who seem to be operating on outdated or incomplete information. I'm particularly grateful for all the specific IRS references mentioned - Revenue Ruling 69-184, Publication 541, Treasury Regulation 1.707-1(c), and Form 1065 Instructions. Having these authoritative sources compiled in one thread is invaluable for anyone needing to educate their preparer about legitimate partnership structures. For Mateo's original question, it sounds like your arrangement is not only legal but actually well-structured from a tax perspective. The key seems to be having clear documentation in your partnership agreement that separates your employee duties from your ownership interests, plus ensuring your W-2 compensation is reasonable for the actual work you perform. If your current preparer continues to resist after being shown the actual IRS guidance, it might indeed be time to find someone with more partnership taxation experience. Partnership tax law is complex, and you need a preparer who's willing to research and learn rather than rely on assumptions.

As someone new to this community, I want to echo what others have said - your arrangement is absolutely legitimate and your tax preparer is misinformed. I recently went through partnership training for my CPA continuing education, and dual W-2/K-1 compensation was covered extensively as a standard practice. What might help is explaining to your preparer that this isn't about "being an employee of your own partnership" in the traditional sense. You're providing services to the partnership entity in a capacity that's separate from your ownership interest. Think of it like a partner in a law firm who also serves as the managing partner - they get compensated for those additional management duties beyond their ownership distributions. The IRS specifically recognizes this distinction in multiple publications. Revenue Ruling 69-184 addresses the employee status question, but it's focused on specific benefits and employment tax issues, not on whether compensation can be paid via W-2. If showing her the IRS guidance doesn't work, you might ask your partnership attorney to provide a brief letter explaining the structure. Sometimes hearing it from a legal professional who specializes in partnership law carries more weight than client explanations. Your business structure makes perfect sense and is designed to properly separate compensation for work from returns on investment. Don't let an uninformed preparer force you into a less advantageous tax arrangement.

Just wanted to add something that might help with the practical side of understanding your paycheck - if you're using direct deposit, most banks now show a detailed breakdown of your pay stub in their mobile apps or online banking. I was getting confused trying to match up all the different tax withholdings until I realized my bank app actually categorizes each deduction. You can see exactly how much went to "Federal Tax," "Social Security," "Medicare," etc. It made it much easier to verify that the percentages everyone mentioned here (6.2% for OASDI, 1.45% for Medicare) were actually being applied correctly to my gross pay. Also, if you're still confused after reading all these great explanations, your HR department should be able to walk through your pay stub with you. They deal with these questions all the time and can explain exactly how your specific withholdings are calculated based on your W-4 selections. The key takeaway is definitely that these are separate taxes serving different purposes, but it's totally normal to be confused about it at first!

This thread has been incredibly helpful! I just wanted to add one more practical tip that saved me a lot of confusion - if you get multiple W-2s in a year (from different employers), make sure to add up ALL the Social Security taxes withheld across all your W-2s when you file your taxes. I had three different jobs last year and each employer withheld Social Security tax independently. Since I didn't hit the wage cap ($160,200 for 2023), I should have paid 6.2% on all my wages combined. But when I added up all my W-2s, I realized one employer had miscalculated and I was actually over-withheld by about $400. The good news is that if you over-pay Social Security tax due to multiple employers, you get that money back as a credit when you file your return. It shows up on your tax software automatically if you enter all your W-2s correctly. Just another reason why it's so important to understand that OASDI/Medicare are separate from income tax - each has its own rules and caps that you need to track, especially if your employment situation is complicated!

Be careful about the "qualifying relative" test for your girlfriend. If she received any grants or scholarships for college, those might count toward her income limit of $4,700 for 2023 (it's higher for 2024). Also, if she had any side hustles, even small ones, that income counts too. I made this mistake claiming my boyfriend as a dependent. He had a small Etsy shop that only made like $2,000, but then he also got a $3,000 scholarship. The IRS came back and disallowed him as my dependent because his total income was over the limit. Double check EVERYTHING before filing!

This is a complex situation that requires careful documentation! Based on what you've described, you likely can claim your girlfriend as a qualifying relative dependent if she meets all the tests - living with you all year, having less than $4,700 in gross income, and you providing more than half her support. For her son, it's trickier. Even though he lives with you most of the time, the biological father typically has priority as the parent. However, if the father chooses not to claim him and you can prove you provide more than half the child's total support (including accounting for the child support payments), you might qualify. Here's what I'd recommend: First, calculate exactly how much you spend on both of them versus other sources of support. Keep detailed records of housing costs, food, clothing, medical expenses, etc. Second, have an honest conversation with the biological father about who will claim the child to avoid both of you filing for the same dependent. Third, consider consulting a tax professional or using one of the IRS resources mentioned here to verify your situation before filing. The potential tax benefits are significant (Child Tax Credit could be worth over $2,000), but getting it wrong could trigger an audit or dispute. Better to be thorough upfront than deal with IRS letters later!