I had to repay $10,000 signing bonus when I left my job. When I put this amount into TurboTax my Federal Amount owed did not change. The IRS says that the amount of tax that was paid on it during the previous year is the greater a deduction calculation or a credit. When I enter this $10,000 amount in TurbTax the amount of federal tax I owe does not change. This seems to be an error in TurboTax logic, since I should be able to get it as a credit. I have sent the file to TurboTax, token number 1220055.
From IRS Pub 525:
Repayment over $3,000. If the amount you repaid was more than $3,000, you can deduct the repayment as an other itemized deduction on Schedule A (Form 1040), line 16, if you included the income under a claim of right. This means that at the time you included the income, it appeared that you had an unrestricted right to it. However, you can choose to take a credit for the year of repayment. Figure your tax under
both methods and compare the results. Use the method (deduction or credit) that results in less
tax.
