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  • Sign on "loan"

    Hello,

    I took a job that essentially paid a early "transition loan" instead of sign-on bonus. They gave approximately 60% of the loan as a check and held 40% in anticipation of tax (my contract stipulates the loan will be repaid from a "sign on bonus" as taxable income on the first date of employment, which is later this year). Do I report that as income for this last year's taxes or for this upcoming year when the sign-on bonus is actually paid? Any help would be much appreciated!

  • #2
    If I understand correctly, the $60k check you received in 2017 is treated as a loan to you. When it is converted to a "bonus" and repaid in 2017, it will be counted as taxable income to you and will go either on a 1099 or will be included with your W2 wages.

    What I am trying to understand, though, is what the employer is doing about the $40k. Did they give you the $60k as a paycheck, withholding $40k in taxes? Or did they simply cut a $60k check to you? This will help me clarify if I am advising correctly.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      It was actually a 40k sign on bonus that would be paid on my first day of employment later this year. In the meantime, they gave a “transition loan” of 40k. I was sent a loan check for 60% of this (24k), in anticipation of a 40% tax. The loan is to be repaid by my employer on the first day of employment with the 40k sign on bonus, of which they will pay the taxes at that time.

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      • #4
        I see, sorry for misunderstanding the amounts. The concept is the same - you were "loaned" $24k. They will later cut a "net-zero" paycheck in your name reflecting $40k gross, $16k tax withholding, and $24k loan payback. You will owe nothing at that point and your bonus will be accounted for on your 2018 W2 form.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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