Labor Law Guy

Ouch, Now That Hurts! Returned Bonuses May Be Taxable

Posted in Random Musings by laborlawguy on March 30, 2009

A tax law doctrine known as “constructive receipt” could put those AIG employees who returned their bonuses in jeopardy of having to pay taxes on them anyway.

Goes like this: Constructive receipt prevents people from gaming the system, say by performing work in late 2008 and asking to be paid in 2009 to reduce tax liability by shifting it forward. This is a no-no, but obviously it’s pretty easy to get away with if you’re billing others for goods or services and not being paid wages.

Now, this would/could apply to the AIGers if they returned the bonuses with the understanding that they’d re-recieve them when times are better.

The ball is now in the IRS’s court. Let’s see if the Obama/Geithner IRS is a vindictive one.

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