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Level 6

Received commission in 2018, returned commission in 2019

I received a large commission in 2018. I reported it as income on my tax return. The client cancelled the policy in 2019. It is setup that the insurance company does not pay me until I pay off the owed  commission. The new commissions I earned in 2019 reduces the liability of the owed commission. I won't be able to pay off by end of 2019. How should I file my 2019 tax return?

1 Reply
Level 19

Received commission in 2018, returned commission in 2019

 

 

if it is, there's nothing for you to do.  if they're  deducting the overpayment $ for $ and you don't earn enough in 2019 to fully repay the form should reflect $0 

 

if it's not net, you get a w-2, and the amount repaid is $3,000 or less, there is no deduction or credit.  if 1099' you deduct on schedule C

 

if it's not net. you get a W-2, and the amount repaid is more than $3000 you can choose between a deduction and credit 

 

consider the total amount being repaid on the return. Each instance of repayment isn't
considered separately.
Method 1. Figure your tax for the year of
repayment claiming a deduction for the repaid
amount.
Method 2. Figure your tax for the year of
repayment claiming a credit for the repaid
amount. Follow these steps.
1. Figure your tax for the year of repayment
without deducting the repaid amount.
2. Refigure your tax from the earlier year
without including in income the amount
you repaid in the year of repayment.
3. Subtract the tax in (2) from the tax shown
on your return for the earlier year. This is
the credit.
4. Subtract the answer in (3) from the tax for
the year of repayment figured without the
deduction (step 1).
If method 1 results in less tax, deduct the
amount repaid. If method 2 results in less tax,
claim the credit figured in (3) above on Form
1040.  enter the credit on
Schedule 5 (Form 1040), line 74, and see the
instructions there.