How does the clawback on clerkship bonuses work?

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How does the clawback on clerkship bonuses work?

Postby Anonymous User » Mon Feb 26, 2018 5:33 pm

Lets say a law firm pays a 50k clerkship bonus contingent on the associate staying one year. If the associate leaves after 8 months do they pay back the whole 50k or just $12,500? What about the fact that taxes have already been taken out? Do you pay back a pre-tax or post-tax portion of the bonus? Is it only if you quit? What if they lay you off? Obviously no one goes in expecting to stay less than a year but would be good to know.


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Re: How does the clawback on clerkship bonuses work?

Postby hlsperson1111 » Mon Feb 26, 2018 6:21 pm

The clawback is almost always pro rata. I have never heard of a firm clawing back the whole amount.

After 8 months you would pay back 16,667.

The tax implications are complicated. My understanding is that you claim a tax loss in the year you repay the bonus under the "claim of right" doctrine, rather than amending a past year's return to reflect a lower amount of income (and tax payable).

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