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Totally agree....don't do anything like that (i.e., steeling from your employer), unless you have instructions in writing). He'll support you now but not when you get caught.
Your boss my like you and feels this is one way he can give you an extra bonus and have nothing more than good intentions. I would still only report your actual hours worked - he will still like you and if he really feels compelled to help you out - he should get you a permenant raise (in fact, maybe you should hint at that. i.e., "it's no big, boss. Just get me a decent raise this year").
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