Repaymnt of prior year Income

[patfitz]

How can I create an entry on Schedule 3 line 13b to reflect a sign on bonus I received as reported income in 2022 but paid back in 2023 when I left the position? If I cannot, how do I process these forms manually and file the whole package?

[Cynthiad66]

A Claim of Right Repayment is a deduction you can take in the current tax year if you’re required to pay back income in excess of $3,000 from a previous tax year that you thought you could keep. You reported and paid taxes on the money, not knowing you’d have to pay it back.

Examples of this type of income include: the repayment of signing bonuses, moving expenses, unemployment compensation, and other funds.

While you still have to repay the money, there are a couple of ways you can get a tax break by reporting the repayment on your current year tax return:

1. Take a simple deduction of the repaid income from the current year’s income (this is the easiest option for taxpayers who itemize their deductions).
2. Use TurboTax CD/Download to calculate the amount of tax you overpaid and take a refundable credit.
   • You should test both methods and use the one that results in the lower overall tax.

Whichever option you choose, we’ll walk you through the steps.

Taking the simple deduction

Taking the credit in TurboTax CD/Download