Under the tax reform law that was passed in 2017, if the amount you repaid was $3,000 or less you do not get any tax adjustment for the repayment.
If you repaid more than $3,000, you report the repayment on your tax return for the year that you gave the employer the check, 2020. It makes no difference that they delayed cashing it.
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 2020 tax. 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. You can't do that 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 the credit works out better, there is one more complication. 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 2020 as well.
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 12d with the notation "IRC 1341."
