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Tuition assistance repayment

hi. In 2019 I received 21762.00 tuition benefits from my previous employer which I was taxed for after 5250$ (it showed as income on my w2). I recently changed jobs, and now my old employer is asking for a repayment of ~11000$. Will I be able to get a tax return over this amount?

2 Replies
Level 15
Level 15

Tuition assistance repayment

Your tax return is the form you send to the government that shows your income and calculates your tax. Any money that you get back from the government is a refund.

For a repayment of more than $3,000 you will be able to get a deduction or credit on your tax return for the year that you repay the money. The deduction or credit will reduce your tax. There are two ways to handle a repayment of more than $3,000. The first, and simplest way is to claim an itemized deduction for the amount of the repayment. But that doesn't help you unless you have enough other itemized deductions to make your total itemized deductions, including the repayment, more than your standard deduction. If your total itemized deductions, including the repayment, are not more than your standard deduction, you do not get any benefit from the deduction.

The second, more complicated option is to claim an "IRC 1341" credit, which would directly reduce your 2021 tax (assuming you repay the money this year). If you would get some benefit from the itemized deduction, you should try both options and use the one that makes your tax lower. You can read all the details of both options under "Repayments" in IRS Publication 525. The discussion in Publication 525 calls the itemized deduction "method 1" and the credit "method 2."

TurboTax will not calculate the credit for you, or compare the deduction and credit to see which is better. You have to do all the calculations yourself.

To calculate the credit (method 2) you have to recalculate your 2019 tax return. How you do that depends on how you prepared your 2019 tax return. You can't do the recalculation in TurboTax Online. If you used TurboTax Online for 2019 you would have to download your .tax2019 data file, then use the CD/Download TurboTax software for 2019 to do the recalculation. You could either call customer service and ask for a free download of the 2019 software, or use the free 2019 amend software, even though you are not actually amending your 2019 tax return. If you filed your 2019 tax return with software other than TurboTax, you will have to use that software to do the recalculation.

If the credit works out better, there is no way to enter the credit in TurboTax Online, because it's not covered in the TurboTax interview. It can only be entered in forms mode, which is only available in the CD/Download TurboTax software. So you would have to use the CD/Download software for 2021. (I'm assuming this will be true for 2021, since it has been this way for years. TurboTax for 2021 is still in development.)

To enter the credit in forms mode, open the "Form 1040 or Form 1040-SR Worksheet." Scroll down to the "Other Credits and Payments Smart Worksheet" near the bottom. (Do not confuse the "Other Credits and Payments Smart Worksheet" with the "Other Credits Smart Worksheet," which is not quite as far down on the form.) Enter the credit that you calculated on line D of the "Other Credits and Payments Smart Worksheet." The repayment will then appear on Schedule 3 line 13d (for 2021).


Level 15

Tuition assistance repayment

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