What are the options regarding payback if a company gave me a relocation package which was included in my payroll and taxed accordingly?

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What are the options regarding payback if a company gave me a relocation package which was included in my payroll and taxed accordingly?

It was recorded on my W2 as earned income. I had to leave the company for family reasons but not before I inquired about a transfer which i was denied. They now want full repayment of the relocation funds with 12% interest. Can they collect interest on my taxed income?

Asked on June 19, 2012 under Employment Labor Law, Massachusetts

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

1) They can only require you to repay the relocation funds if either:

a) there was an agreement between you and the employer that if you left prior to a certain date or left voluntarily (i.e. were not fired), you would repay these funds; without an agreement to repay, them, you would not have to repay unless--

b) you committed fraud to get the relocation paid for--i.e. there is evidence that you knowingly lied to the employer about taking and staying with the relocated job (did not have an intention of staying with it at the time you accepted the funds), but rather took the funds to be relocated for purely personal reasons (such as to be near family) and intended all along to quickly leave employment.

2) Even if the company had grounds to recover the funds, they could *only* legally recover interest if there had been an agreement in place that if you did have to repay the relocation, you would also pay interest. Without a prior agreement, there is no ground to impose interest on you.

3) If there was an agreement to pay interest, it would apply to the gross amount of the relocation funds (i.e. the pre-tax amount), and so yes, then you'd have to pay interst on the taxed portion.


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