First of all, you do not report the Form SSA-1099's that report the payments your children received. You will only report the Form SSA-1099 that reports the benefits that your husband received.
You will report the repayments you make each year as a deduction.
The Claim of Right allows you to take a deduction (or credit) for repayment of income that was taxable in a prior year. If you don’t itemize, that won't be helpful to you!
IF you pay back less than $3000, the repayments are deductible on Schedule A (subject to the limitation of 2% of your Adjusted Gross Income.)
To report the repayment:
- Log into your return
- Click on Federal
- Click on Deductions and Credits
- Scroll to Other Deductions and Credits.
- If needed, click on the Show more button.
- Click the button next to Other Deductible Expenses
- The Generation-Skipping tax question doesn't apply to you.
- On the next screen, you will be asked if you have any of the less common expenses. (One of the expenses listed is the repayment of $3000 or less.)
- On the following screen, you can enter a description and amount.
If you paid more than $3000 and prefer to take a deduction on your Schedule A that isn't subject to the 2% of Adjusted Gross Income limitation:
- The next screen after the instructions above asks if you had Right of Repayment MORE than $3000.
- Click yes, and then enter the amount you repaid.
IF you pay back more than $3000, you have the option of taking a tax credit in 2017 (in the year of the repayment).
To calculate and claim the credit you would need to use TurboTax CD/Download because the amount has to be entered in Line 73, box d of your Form 1040.
Per IRS instructions from IRS Publication 17:
"If you are claiming a credit for repayment of amounts you included in your income in an earlier year because it appeared you had a right to the income, include the credit on line 73. Check box d and enter “I.R.C. 1341” in the space next to that box. See Pub. 525 for details about this credit."
For information on calculating the credit, Click Here
Go to page 34 and start reading at repayments. You have to recalculate what your tax would have been if the income you repaid wasn't included when you originally filed. Then take the difference between 1) the taxes you actually paid with the income included and 2) the taxes you would have paid if the income hadn't included the repayment amount.
Enter the difference as a credit on Line 73, check box d and indicate I.R.C. 1341.
