How to handle taxes after repaying relocation package - help needed!

You're dealing with what's called a "claim of right" repayment situation. Since the amount you're repaying is over $3,000, you have two options for handling this: 1. Take a deduction in the year you repay the money (2023 tax return) 2. Calculate your tax in the current year with and without the income, then take a credit for the difference on your current return Usually option 2 (the tax credit method) is more beneficial for larger repayments like yours since relocation packages are typically taxed at your marginal rate when received. For the Social Security and Medicare taxes (FICA), TurboTax is correct that you need to work with your former employer. Only employers can file for refunds of the FICA taxes on repaid amounts - there's no way for you to directly claim this on your personal return. Your former employer would need to file Form 941-X to claim the refund, then they're supposed to reimburse you.

I went through something similar with a signing bonus repayment last year and ended up using taxr.ai (https://taxr.ai) to handle the documentation and calculations. Their system let me upload my original tax docs and the repayment agreement, then generated all the paperwork I needed for the amendment. The trickiest part is definitely the FICA tax issue. My former employer initially refused to process the 941-X form until I sent them the detailed explanation that taxr.ai provided about their legal obligation to do so. Saved me about $1,200 in Social Security and Medicare taxes that I would have otherwise lost.

Just wanted to update that I ended up using taxr.ai after seeing it recommended here, and it was genuinely helpful for my multi-state amendment situation. Their system automatically determined I should use the tax credit method instead of the deduction method since I was in higher tax brackets when I originally received the relocation package. The documentation they provided for my former employer regarding the FICA tax refund was super detailed - included all the relevant tax code citations and step-by-step instructions for their payroll department. My former employer's HR actually thanked me for providing such clear guidance because they'd never processed one of these before. One tip: make sure you have your original tax returns handy before you start, along with any documentation showing the repayment terms and proof of payments you've made. This makes the whole process much smoother.

If you're struggling to get your former employer to cooperate with the FICA tax refund process, I had luck using Claimyr (https://claimyr.com) to get through to an actual IRS agent who explained the process to my stubborn ex-employer's payroll department. You can see how it works here: https://youtu.be/_kiP6q8DX5c My situation was that I had repaid a tuition reimbursement, and the company initially claimed they couldn't help with the FICA portion. After weeks of getting nowhere, I used Claimyr to get an IRS agent on the phone in under 20 minutes. The agent confirmed the employer's obligation and even spoke directly with their payroll person to explain the Form 941-X process. Completely changed the dynamic from them ignoring me to actively helping.

I need to eat some crow here. After posting my skeptical comment, I was still struggling with my own relocation repayment situation and decided to try Claimyr out of desperation. I honestly didn't expect much, but I got connected to an IRS agent in about 35 minutes (which is miraculous considering I had previously spent HOURS getting nowhere). The agent walked me through the Section 1341 credit approach and confirmed that I was doing the calculations correctly. She also explained exactly what documentation I needed to include with my amended return to avoid delays in processing. Then she helped me understand how to approach my former employer about the FICA tax issue. I'm still in the process of getting everything filed, but having that direct conversation with a knowledgeable IRS agent made a huge difference in my confidence level about handling this correctly. Sometimes it's worth admitting when you're wrong!

One thing nobody's mentioned yet - make sure you're accounting for any tax benefits you received from the relocation expenses in the first place. If you took deductions for moving expenses (which were mostly eliminated after 2017 except for military), you need to factor those in. Also, check if your repayment agreement includes the gross or net amount. Some companies only require repayment of the net amount (what you actually received), while others require the gross (including what went to taxes). This makes a big difference in how you handle the amendment.

Has anyone successfully done this without professional help? I'm trying to save money and do the amendment myself for a similar situation (had to repay a portion of a signing bonus).

I dealt with a similar relocation repayment situation a couple years ago. One thing that really helped me was keeping meticulous records of all the payments I was making back to the company - dates, amounts, and any correspondence about the repayment terms. The IRS wants to see clear documentation that ties your repayment to the original income. Also, don't sleep on getting that FICA tax back from your former employer. In my case, it was about $1,200 that I almost left on the table because the process seemed complicated. Once I understood that the employer is legally required to file the 941-X and reimburse you, I was more persistent in following up with their payroll department. The timing worked out well for me using the Section 1341 credit method - I got my federal refund in about 12 weeks after filing the amendment, which was much faster than I expected. Just make sure you attach a clear statement explaining the claim of right situation when you file.

I'm in a somewhat similar situation but with a twist - I had to repay part of a relocation package after getting laid off (not quitting), and I'm wondering if that changes anything about how the tax treatment works? The company is still requiring repayment based on the time I was there being less than the full commitment period. Also, for those who have been through this process, how did you handle the repayment if you're doing it in installments over multiple tax years? Do I need to amend each year as I make payments, or can I wait until the repayment is complete? The total amount I owe is about $12k but I'm paying it back over 18 months.

I've been following this thread as someone who went through a similar relocation repayment situation last year, and wanted to add a few practical tips that might help: First, when calculating whether to use the Section 1341 credit vs. deduction method, don't forget to factor in any changes to your filing status or other major tax situations between the original year and repayment year. I was single when I received my relocation package but married filing jointly when I had to repay it, which made the credit method even more beneficial. Second, if your former employer is being difficult about the FICA tax refund, try reaching out to their corporate tax department rather than just HR/payroll. In my experience, the tax folks understood the 941-X requirement much better and were more willing to help once they realized it was a legitimate tax obligation on their end. Finally, start this process early in the tax season if possible. Amended returns take longer to process anyway, and if you wait until close to the deadline, you might run into issues if the IRS has questions or needs additional documentation. I filed my amendment in February and had everything resolved by June, which felt much less stressful than waiting until the last minute. The $3.3k federal refund you're expecting sounds reasonable for a $16k repayment, especially if you were in the 22% bracket when you originally received the income.

I've been through a very similar situation with a relocation package repayment, and I want to emphasize how important it is to get the Section 1341 calculations right. The IRS is pretty strict about the documentation requirements for claim of right situations. One thing I learned the hard way - when you're calculating the tax benefit under Section 1341, you need to use your exact tax situation from the original year, including any other income changes, deductions, or credits that might have affected your marginal tax rate. It's not just a simple percentage calculation. Also, regarding the FICA tax recovery from your former employer - don't let them brush you off. The employer gets to claim a credit for the excess FICA taxes they paid when they file Form 941-X, so this isn't costing them anything. They're legally required to refund you your portion. If they continue to resist, you might want to escalate to their legal or compliance department and reference IRC Section 3402(d) which covers this exact situation. Keep all your documentation organized and make copies of everything before you submit. The IRS sometimes requests additional supporting documents for these types of amendments, and having everything ready speeds up the process considerably.