you were paid the relocation package in 2020 you paid it back in 2021. the tax laws say you get the refund on the income taxes you paid on the RP in 2021. this is section 1341 of the tax code
what you should have done first for your 2020 return and not as an amendment but simply an adjustment to box 1 of your w-2 is to reduce it by the relocation gross compensation you paid back in 2021. this reduces your 2020 income taxes. the difference between your original total Federal tax liability for 2020 as originally filed and the lower amount recomputed is claimed as a tax credit on your 2021 return. this amount is reported on Schedule 3 line 13z as section 1341 credit.
print out pages 1 and 2 of the 1040 and save for your records
then you change back box 1 to what was originally entered.
save the return
the only items that should have changed on your 2020 w-2 are 3 through 6 which relate to social security and medicare for which you would not need to file an amended 1040. if you have state income taxes what you need to do to recoup the taxes paid on those wage can be the same or completely different
here is a summation
Repayment in subsequent year. If the employee repays the compensation in a subsequent year, the employee must repay the net payment plus the income tax withheld. (there may have been other items deducted that you have to pay back) The employer will recoup the FICA tax withheld by amending its 941 returns. The employer must also issue a corrected W-2 showing the employee’s corrected Social Security and Medicare compensation, and corrected Social Security and Medicare withholdings (boxes 3, 4, 5 & 6). Rev. Rul. 79-311. However, the W-2 compensation reported in box 1 and the withholding in box 2 stay the same. The reason is that the employee has received the benefit of the income tax withholdings when the employee filed his or her income tax return for the year. - any income taxes paid on the returned compensation is recouped as described above.
if the company did not handle it this way it is not in compliance with the tax laws and you should consult with a tax pro.
if only boxes 3-6 changed no amended return should be filed.
