Paying Back Gross Sign On Bonus

So I quit my job at a BB and have to pay back the signing bonus.

When I received the 10k sign on, I only ended up with $5,700 after tax.

They want me to pay the FULL 10k back to them. I filed my taxes and Im getting back a total of 4k.

How does this even make sense? If I pay them back the full 10k...I'm basically losing money.

I only received 5,700 + 4,000 in total taxes (which means I get back none of the tax from my paychecks normally?) + another 300 out of pocket.

Signing Bonus Agreement - Return Policy

While it is difficult to answer the particular dilemma of the OP, generally speaking many contract agreements stipulate that you have to back the full signing bonus if you leave within a certain period of time.

calbanker1 - Corporate Finance Analyst:
You might want to check the terms of the signing bonus, but I wouldn't be surprised if it says that you have to pay back the gross. After all, that is what the company paid to you, it's just that with taxes, you ended up with much less than $10k.

User @NorthSider" shared a tip on how to become whole on the difference between what you received originally and what you had to pay back to the bank:

NorthSider - Private Equity Associate:
Of course you have to pay back the gross amount. On next year's tax return, you can either take a credit for the taxes you paid on the bonus or a tax deduction for the total amount of the bonus repaid, whichever is greater. You're not going to be out the taxes, either way.

Do I Have to Repay My Signing Bonus?

Several users shared that it wasn't necessary to pay back the sign on bonus even if the bank wanted it back.

jankynoname - Asset Management Analyst:
That said, given that you've already burned your bridge at the BB, I think a lot of reasonable people probably wouldn't repay the signing bonus. They're unlikely to come after you for it given the legal cost would far exceed the actual 10k. But know that you'll never work for that particular bank again.

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Did you underpay taxes on other earned income? the tax calculation is usually pretty complex and it won't wash out to be equal to after-tax bonus + tax refund. That said, given that you've already burned your bridge at the BB, I think a lot of reasonable ppl probably wouldn't repay the signing bonus. They're unlikely to come after you for it given the legal cost would far exceed the actual 10k. But know that you'll never work for that particular bank again.

 

At my job, the relocation bonus stipulates that if I leave within x years, I have to pay back the GROSS amount. You might want to check the terms of the signing bonus, but I wouldn't be surprised if it says that you have to pay back the gross. Afterall, that is what the company paid to you, it's just that with taxes, you ended up with much less than $10k.

 

Isn't this standard in analyst contracts across banks? Employers want the gross signing bonus paid back because that's the expense they incurred. They aren't going to be so nice as to let you enjoy the tax shield they get by recognizing your wages as an expense on their books.

 
SECfinance:

This has nothing to do with the taxes you paid, it has everything to do with them getting the money back that they paid you. They don't care how much you got after-tax.

This is exactly correct.

You can get whole on your taxes, but the company sure doesn't care about that. Why would they do anything else for someone is leaving their firm?

btw - it sounds like you really thought this one through. This is fairly common knowledge.

twitter: @CorpFin_Guy
 

Well technically speaking it cost the employer not 10k, but 10k(1-Tc) since wages are tax deductible. But I guess if you pay back the bonus then the company has to recognize the repaid bonus as a gain and then pay tax again on it. So only the govt benefits in this situation. Damn.

 

Of course you have to pay back the gross amount. On next year's tax return, you can either take a credit for the taxes you paid on the bonus or a tax deduction for the total amount of the bonus repaid, whichever is greater. You're not going to be out the taxes, either way.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."
 

I always wondered about this and how enforceable it really is. Apparently my BB also has this pay-back policy, but in the contract I signed, there is NOTHING in there that says ANYTHING about it (it doesn't even specify the fact that there was a relocation allowance in the first place). I will find out soon BC I recently relocated and they paid me 10k for the relocation and I am resigning next week which is less than a year after the relocation. If they ask me to pay it back, I don't think I will do it, I really wonder if this is even enforceable since a) it is not stipulated in my contract and b) I have never been officially informed of this policy even verbally at any point. I can update you all on what happens in about a week or so, haha!

 

For all those who think it's "unenforceable", have fun rolling the dice with your credit score.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."
 
Gini:

Lol, I am not American and am leaving the country for good. I could care less about my credit score, ha!

Well then, I guess this solves everything... :-)

Chill
 
Angus Macgyver:
Gini:

Lol, I am not American and am leaving the country for good. I could care less about my credit score, ha!

Couldn't. You couldn't care less.

Yes, correct, couldn't care less! And the collection agency can look real hard for me too. Anyhow, I'll see if they even make me pay back in the end, I can update the thread again in a week or so.
 
Angus Macgyver:
Gini:

Lol, I am not American and am leaving the country for good. I could care less about my credit score, ha!

Couldn't. You couldn't care less.

Thine mastery of the spoken anglo saxon language is inspiring my sire and ye verily verily thine swift chastisement of the aforementioned barbarian and it's feeble attempt at communication is exceedingly pleasant.

 

They will hire a collection agency if you don't pay back the full amount- shitty but no option other than to comply

I'm on the pursuit of happiness and I know everything that shine ain't always gonna be gold. I'll be fine once I get it
 

I'm assuming you received your bonus in 2013 and filing now. Depending on when you quit they may have already issued your W-2 before the change. Check on that first and see if you can get a corrected W-2 and update your return. Even if you already filed your return you can refile an amended version. This should increase your refund (though if you underpaid in general it still might not cover the entire amount). Also keep in mind that part of the initial withholding went to pay state and local taxes too (NYC tax may be a big chunk). So look for money back in your state return too.

 

Think about this from the BB's perspective - they paid $10,000 for you as a signing bonus. YOU paid the government X amount in taxes and Y amount for yourself.

They want their $10,000 back, that's how much they paid out. Whatever got paid in taxes to the government is between you and the government. As far as the BB is concerned, they paid $10,000 for you and they want it back because you broke the agreement

 

Tell them you wont pay it back. If they insist and threaten to file a lien then tell them you will pay back a prorated amount. Most companies will compromise on this if they insist on a repayment.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 

I had this happen to me. Here's what should happen:

You pay back ~$5700 (post-tax signing bonus) upon leaving early. The following year, you ask for a W-2C (corrected W-2) from that year and the IRS will back out the taxes you unnecessarily paid by lowering your income for that year. Collect tax refund!

Not sure how they can ask for the 10k back. That makes no sense.

 

What did you do in the end? Dealing with a similar situation and cannot find conclusive info online and all accountants I've talked to seem to be blowing smoke and don't know what to do. Thanks

 
Kevin-Lee2:

What did you do in the end? Dealing with a similar situation and cannot find conclusive info online and all accountants I've talked to seem to be blowing smoke and don't know what to do. Thanks

If your bank requests you to pay back the signing bonus, you will most certainly be asked to pay back the gross amount. At the end of the tax year, you will then claim either a credit for the taxes you paid on the original signing bonus or a deduction for the gross amount of the signing bonus, whichever is more favorable to you. Until that time, you will be out the tax portion of the bonus.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."
 

Actually, after a double take, I have the same provision in my contract (and the only one).

So does this mean that they cannot require a repayment of the bonus if they chose to pull one's offer?

 

FWIW, I've heard that typically if the firm cuts you, you get to keep it (as a severence package of sorts). If you leave on your own volition, however, it's up to you to pay up.

In response to the above poster, I have known people forced to repay after leaving on their own.

 
 

Not all banks have a one year provision, I have seen an offer from a BB that had a significantly shorter period of time (like three months or so).

To answer the question in the OP: Yes, you are going to have to repay it. I am sure that your contract is worded differently than what you wrote, but that does not really matter, because you will be technically reneging on your offer since you will not be eligible to work.

Even if they were to rescind your offer with cause (failed drug test, etc.), you would still have to repay your bonus (the whole $10,000). You can probably amend your tax returns to receive the tax portion back, although I am not sure how to get Medicare and SS back.

 
Best Response

It varies depending on the bank... but i'm pretty sure its not prorated. They just take back ALL of it. BUT... its not necessarily 1 year depending on where you are.

At some places, after 6 months its yours to keep.

At some places its after 1 year.

And at other places its completely random.

At my boutique I received my sign-on after a certain period (ie. 90 days) after my start date, and once I received it, it was mine to keep regardless. That 90 days was its "vesting" period.

FYI... if you're at a boutique you've got a little more negotiating room, especially if you're not a fresh graduate. In hindsight I'd probably try my best to forgo the sign-on bonus and instead have it tacked onto my base.

1- This way you have to stick around all year to get the full benefit of the "sign-on" bonus

2- Even if you leave half way, you don't have to pay it back, its effectively pro-rated

3- Bonuses are typically (in my experiences) based off of your base salary. If you get a 50base+10sign-on, your base is 50, and you bonus is a % of that. If you are 60+0sign on your base is 60 and your bonus is a % of 60

4- extra 10k carries forward every year

5- if you do jump ship to go somewhere else, you have a higher starting point***

 

If the contract says you cant leave before a year or you have to pay it back.......can you submit your 2 week notice so that it ends a day after your start date? Or do you have to submit your two week notice after you have already been there a full year?

 
LVIII:
If the contract says you cant leave before a year or you have to pay it back.......can you submit your 2 week notice so that it ends a day after your start date? Or do you have to submit your two week notice after you have already been there a full year?

Please tell me this is a joke.

 
LVIII:
If the contract says you cant leave before a year or you have to pay it back.......can you submit your 2 week notice so that it ends a day after your start date? Or do you have to submit your two week notice after you have already been there a full year?

Dude, the two weeks notice thing is only if you work at McDonalds. You'd better pack your shit and say goodbyes before you tell them you quit, because there will be a security officer walking you out of the building (to stay) as soon as the word "quit" leaves your lips.

  • Capt K
- Capt K - "Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham
 
stevenbn:
Anybody have experience leaving your analyst program after one year and the bank making you pay back a pro-rated portion of your signing bonus.

Seriously though, no one has a friend or knows from experience how it works? Especially with a BB....

 
LVIII:
stevenbn:
Anybody have experience leaving your analyst program after one year and the bank making you pay back a pro-rated portion of your signing bonus.

Seriously though, no one has a friend or knows from experience how it works? Especially with a BB....

Yes, I work for a US BB, and ours is pro-rated for one-year. For instance, I have been working full-time for 9 months. My sign-on bonus was 10k. (3/12)(10000)= 2500. 2500 is what I would have to pay back if I quit today (the before tax amount).

 

Not sure when the actual payment is, but at my bank we were expected to pay back the pro rata portion of the signing bonus based on a 1-year vesting period. Of course, no one left in their first year, so I never got to see the policy in action.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

My contract states that if I decide to leave the bank, I would need to pay back the whole $20K within 7 months...kinda harsh.

-------------------------------------------------- "Whenever I'm about to do something, I think, 'Would an idiot do that?' And if they would, I do NOT do that thing." -Dwight Schrute, "The Office"-
 
MoneyKingdom:
Most kids who leave banking early (myself included) wait until bonus season to leave. At MS we had to pay it back on a prorated basis.

But if you waited until bonus season that means you did a full year and therefore you didn't have to pay back anything.

My question is do banks really ask you to pay back the money after you leave? I don't care what your contract says or whether it is payback in full or prorated. Do banks really enforce this rule, or in other words has anyone here actually HAD to pay back their sign-on bonus?

I know a guy that left after a month to go to a different bank and rumor has it that he didn't pay back anything...

 

Banks enforce it if you quit or you're fired under really egregious circumstances (IE: you're trying to get fired.)

They typically do not enforce it if you get laid off. A lot of contracts have draconian and very broad wording, but they honestly don't want to fight with someone over money if they've just laid them off. You'll probably get a few months of severance, anyway if they lay you off, so worst comes to worst, you'd be able to pay the signing bonus out of severance.

That said, you should plan on saving money like crazy once you start work- and putting it somewhere safe- especially if you work at an investment bank. I would recommend sticking the signing bonus in a high-yield CD with a lenient early withdrawal policy (You can check out bankdeals.blogspot.com for good rates) or paying down debt that's costing you at least 2% more than you can get from a CD.

The fact that you're asking this question begs a bigger question from me- why do you need to know if you have to give the signing bonus back if you're saving money? A lot of first-year analysts move to the upper west side and live hand-to-mouth (or go into debt) for their first year. These tend to be the analysts who go into a panic when the firm announces layoffs. My first year, I moved to Hoboken and saved up an additional two months' living expenses in the first six months. It made it a lot easier for me to sleep when the firm started laying people off.

Use whatever portion of the signing bonus you need to cover your relocation costs (try to hold the line on this- use U-Haul and try to avoid a broker), and put the rest of that money in a CD. If you don't plan on quitting or going #1 on an MD's leg, you don't have to worry about giving the signing bonus back.

 
IlliniProgrammer:
Banks enforce it if you quit or you're fired under really egregious circumstances (IE: you're trying to get fired.)

They typically do not enforce it if you get laid off. A lot of contracts have draconian and very broad wording, but they honestly don't want to fight with someone over money if they've just laid them off. You'll probably get a few months of severance, anyway if they lay you off, so worst comes to worst, you'd be able to pay the signing bonus out of severance.

That said, you should plan on saving money like crazy once you start work- and putting it somewhere safe- especially if you work at an investment bank. I would recommend sticking the signing bonus in a high-yield CD with a lenient early withdrawal policy (You can check out bankdeals.blogspot.com for good rates) or paying down debt that's costing you at least 2% more than you can get from a CD.

The fact that you're asking this question begs a bigger question from me- why do you need to know if you have to give the signing bonus back if you're saving money? A lot of first-year analysts move to the upper west side and live hand-to-mouth (or go into debt) for their first year. These tend to be the analysts who go into a panic when the firm announces layoffs. My first year, I moved to Hoboken and saved up an additional two months' living expenses in the first six months. It made it a lot easier for me to sleep when the firm started laying people off.

Use whatever portion of the signing bonus you need to cover your relocation costs (try to hold the line on this- use U-Haul and try to avoid a broker), and put the rest of that money in a CD. If you don't plan on quitting or going #1 on an MD's leg, you don't have to worry about giving the signing bonus back.

Are you an analyst/associate?

-------------------------------------------------- "Whenever I'm about to do something, I think, 'Would an idiot do that?' And if they would, I do NOT do that thing." -Dwight Schrute, "The Office"-
 

They can't pull it out of your bank account, but they'll come after you for it. Heck, when one bulge bracket bank declared bankruptcy, the estate sued them for their signing bonuses back.

If they lay you off, they'll typically waive it. If you quit or try to get them to fire you, they'll probably make you give it back.

Just stick it out three more months, collect that bonus, and THEN leave. It's worth it.

 
IlliniProgrammer:
Heck, when one bulge bracket bank declared bankruptcy, the estate sued them for their signing bonuses back.

his bank isn't going bankrupt (i assume). this isn't relevant.

in bankruptcy, any asset transfers to junior creditors that occurred within a certain time period prior to filing (usually 90 days) can be found to be "voidable preferences" and reversed by the bankruptcy court. in this case, employees would be junior creditors (relative to secured debt) and their bonuses could be considered voidable preferences if they were paid right before the bank went BK. the estate might have to try to recover those assets/payments to pay off impaired secured creditors

 

^^ There was another thread about this about a year ago and while most people had to give it back, others said the BB didn't take it back. Don't offer to return it, but if the BB asks give them the bonus.

"Greed, in all of its forms; greed for life, for money, for love, for knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA."
 

I have a friend who left after the first two weeks of training to pursue another opportunity. they had to make him give him back and was legally battling it out on court he had to hire a lawyer and everything in the process in an attempt to sue them back. this was with a MM

 

I can't stick it out...have no choice, unless I want to pass on my other opportunity, which I don't. I am leaving the industry....going to join a growing internet company and I start in the next couple months....I guess I'll see how far they take it, obviously I won't jeopardize my credit/record if they start getting legal about it haha

 
soccerz30:
So, I am leaving banking after 8-9 months as analyst for another opportunity and was wondering how likely it was that I'd have to give back my signing bonus? I know it says it in the contract that they do have the right to take it, but was curious how far they would go to get it back.....can they legally go into my account and just take it? Will they send a collections agency after me? Any insight would help, thanks.

don't offer to give it back to them and even if they ask for it back, i'd ignore their first ask and see if they pursued it any further (although if they ask you once after you've already left, they will probably follow up on it as part of some standard operating procedure). they can't seize it from your bank and they are not going to sell the claim to some debt collector or ruin your credit if you ignore their first ask. i think there's a good chance they just don't ask for it back.

if they do ask for it, they are real scrooges. they're not going to pay you a first year bonus and you've worked 3/4 of the year. signing bonus is chump change.

do not "try to get them to fire you" so you can keep your signing bonus or for whatever other reason. that is just stupid.

good luck at the new gig.

 

It happens, but it's negotiated and there are no guarantees. Sometimes they'll pay it all, sometimes they'll meet you half way, sometimes they'll give you a new signing bonus and if you happen to need to use it to pay off an old signing bonus, that's your problem. Ultimately, it just becomes another variable in the cost/benefit decision that dictates whether or not you take the new job. I'd say there are plenty of times where you'd take the new job, even if you're on the hook for the old signing bonus on your own.

 

I had to repay a signing bonus to my previous firm when I joined my current one. They wouldn't pay the bonus back for me, but the 25% raise in straight salary was enough for me to decide to leave and pay it back solo. The raise in $ terms was ~50% higher than what I had to pay back, so it was worth it in the long run coupled with the better OP and banking a higher salary for future moves.

"It is hard to fail, but it is worse never to have tried to succeed." Theodore Roosevelt
 

Assuming you're leaving for the right reasons (better long term prospects, more money, BSchool opps, whatever) you shouldn't be in a position that 10k would prevent said move.

If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

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"It is hard to fail, but it is worse never to have tried to succeed." Theodore Roosevelt
 

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