This is a claim of right repayment. You can only report it in the year you actually repaid the claim.
If your repayment is less than $3,000, you'll claim it as a Miscellaneous itemized deduction in Schedule A. In this case, if they are using the standard deduction, it would have no effect on their taxes.
If the repayment is more than $3,000, please read this TurboTax Help topic on how to make the claim.
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