@fudixa wrote:
Thank you very much for the response.
About my 2nd question: Should I deduct the $7900 for the tax year 2022 or 2023?
Because the repayment occurred in 2023, you will report the repayment on your 2023 tax return. You can either claim the gross repayment as a special itemized deduction, or claim an "IRC 1341 Claim of Right" credit. If you already itemize your deductions and your income is similar year to year, the two methods will be similar, but you would have to test which method you want to use. If you want to use the IRC1341 method, you will have to determine the credit amount yourself, and you will need to manually enter the credit on your tax return, which means you will have to use Turbotax installed on your own computer instead of the online version. But that's something to deal with next year.
Your answer to my 3rd question: "You will enter the $7,900. It is similar to your W2, your box 3 and 5, the wages are not reduced by the amount in box 4 and 6 from your federal amount. "
Did you mean that deducting $7900 will only lower the federal wages (Box 1 on W-2)? It is the numbers on W-2C that will update the SS and Medicare wages and their withholdings?
I don't understand what you are aiming at. Because you were forced to repay 2022 wages, you were over-taxed in 2022, that included federal income tax, state income tax, and social security and medicare tax. Your company took care of refunding the SS and medicare tax overpayment. The way you get credit for the federal income tax overpayment is to either claim a deduction on your 2023 return (which reduces your taxable income in 2023 and therefore reduces your tax) or you claim an IRC1341 credit on your 2023 return. The way you get compensated for the state income tax is to either take the special itemized deduction which will reduce your 2023 taxable income, or to claim a Claim of Right tax credit on your state return. (You will have to look up how to do this, different states may have different procedures.)
