1. You enter the form exactly as it is, all the income into the program. Then, if you are itemizing deductions, and if the claim is over $3,000, then you can add the repayment to your itemized expenses.
2. If you are not itemizing, you are going to figure your right of claim. Make a copy of your return from the year you received the income before going in and changing things. Note the amount of tax liability. Then you can subtract the amount you paid back from the original amount received. Note the new tax liability. The liability is before all the credits are given. The difference in liability should be noted. Return to this year/s tax return, do the IRC 1341 for 1040 p2 as my original instructions state. Follow What is a Claim of Right Repayment.
You are not amending or submitting a prior year return, only this year.
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