refunded prepayment entry

[ERAJ]

In 2022 we refunded a substantial prepayment to a client (for a cancelled wedding).  That prepayment was reported as income in 2021 (although we probably should have not reported it as income).  Where do we enter it as a reduction of income for 2022?

[MonikaK1 · Accepted solution]

In TurboTax, you can enter the amount of a refund of money previously included as income by going to the Income section of your Schedule C activity, then: 

1. In the Income section, select Add income for this work
2. From the list that appears, select Rebates and Refunds under Less Common Income
3. Enter a description and enter the dollar amount as a positive figure.

See also this help article for more information regarding self-employment income and expenses.

[Carl]

Depending on the version of TTX you are using, the section could be called "Rebates and Refunds" or "Returns and Allowances". Both mean the same thing.