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I was paid relocation by my current employer. I received $7k net (after taxes); and the stipulation was that if I quit within 1 year of employement I pay all 100% back; between 1 & 2 years I pay back 50%.
I plan to leave within that 1 year (long story that is outside the scope of this post).
My question is this... In order for me to get exactly $7k net taxes, my employer cut my relo check for more than $7k (I believe it was around $11k; and the difference went to taxes). When I pay the company back - do I cut them a $7k check, or do I have to also gross it up to cover some sort of taxes??
Great question Atlantagal. I wonder if the same could be said for sign on bonuses/commission draws/or the relocation bonus that you got? Seems like the net amount would be what you would pay back, otherwise, how do you recoup the tax cost? Is that netted off of your W-2/1099 at end of year?
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They gave you $11,000, and you agreed to repay the full amount if you left in less than a year. They will want to be made whole, so you will pay them $11,000. Employer reimbursement is not always taxable, for example when the payment is for moving expenses that are tax deductible, and you have records to support the amounts. If given as additional pay, as in a signing bonus, without accounting of the actual expense (which sounds like your case) then it is taxable. Depending on the timing of quitting with relation to the tax year, you might still be able to deduct the moving expense from your taxes, after paying back the employer, if you do have receipts. I would see a good tax lawyer.
Pre-tax, but you can deduct it as a employment expense/misc. 2% floor deduction if you itemize. If you itemize and already have misc. 2% floor deductions near 2% of your adjusted gross income, you basically break even. However, most people don't have enough, so you'll probably end up losing some of that tax.
It's a crapshoot if they will try to enforce it and make you pay it back. I know some companies don't bother because of the hassles involved, but a lot will try to. Generally, repayment of expenses like that are supposed to be exit interview items. If they mention it in your exit interview, you'll probably be getting a formal letter. If not, they might not bother or they are too disorganized to enforce it.
Depends on why you are leaving. If you are leaving due to work place harassment (of a physical or mental nature) it becomes a legal issue instead of a contract issue. If you are leaving due to some sort of harassment and it has effects on you at work and outside of work, you can certainly mediate any contract obligations through litigation. In those cases it is rare that an employer would be dumb enough to try and recollect.
If you are leaving because you have found another job or you have other nonworker related issues then yes they may ask for the 11k. I would not try to pay it back and see what they do first. If they eventually ask for it back then yes, you should pay it back. And I agree with above posters, try to negotiate that with a new employer to see if they can cover the costs.
I have also seen employees leave and never return to work. In those instances it was a get out of repaying card, sure it was rude and crass, but in their case it served them their purpose. In that instance a company has only one option, termination. They will terminate you and thus you are not responsible for paying the bonus or relocation back.
You certainly don't volunteer the money. However, you need to expect that they will want (and thus, plan to give) 11K back. That's what they gave you. IMO - the fact that you had 4k taken out in taxes is not really their concern anymore.
I've never had any employer NOT try and collect these things (be it signing bonus, tuition advances, etc.) that was contingent on you staying. Anecdotally speaking, this will most likely come up at the exit interview. And you'll be given a few options (deducted from your last paycheck/vacation pay, billed etc.).
You can make them work for it, but be aware of their options. Some will simply forward it to a collection agency. Not sure if creating drama is necessary unless you feel so strongly about them that you'd be willing to risk your personal/professional reputation to get the "last laugh".
Thanks everyone for your responses!! I fully intended on paying them back - just wasn't sure if I should be planning $7k or $11k, but it looks like $11k is the answer. I'm def. going to see what I can negotiate with the new company regarding a sign on.
FYI - I'm not leaving on bad terms and didn't suffer any harrasment or anything with the company. Nothing that could be used as 'leverage' to try to get out of paying it back. I'd LOVE to think that they'll just "drop the issue" and never pursue me for that money... but knowing how this company operates I'm not expecting that. I signed into this "contract" by accepting the offer so I knew what I was getting into...
...although just "leaving and never coming back" in order to get terminated sounds awfully tempting.. especially since this job will never appear on my resume or anything anyways... almost as if it never existed... and if that'll keep me from having to pay back $11k... but honestly that'll be super tough to do - I'd feel like such an a$$hole
Thanks everyone for your responses!! I fully intended on paying them back - just wasn't sure if I should be planning $7k or $11k, but it looks like $11k is the answer. I'm def. going to see what I can negotiate with the new company regarding a sign on.
FYI - I'm not leaving on bad terms and didn't suffer any harrasment or anything with the company. Nothing that could be used as 'leverage' to try to get out of paying it back. I'd LOVE to think that they'll just "drop the issue" and never pursue me for that money... but knowing how this company operates I'm not expecting that. I signed into this "contract" by accepting the offer so I knew what I was getting into...
...although just "leaving and never coming back" in order to get terminated sounds awfully tempting.. especially since this job will never appear on my resume or anything anyways... almost as if it never existed... and if that'll keep me from having to pay back $11k... but honestly that'll be super tough to do - I'd feel like such an a$$hole
Thanks again for your responses and help!!
I'm in the exact same boat. My agreement said if I quit within a year or if I'm terminated I have to pay it back so I doubt the plan to leave and never come back would work. I actually looked into that option too until I read the fine print!
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