You can prepare an amendment in the desktop software to figure the amount of the credit just like you can do using the instructions above for online returns. In the desktop program, search for amend and then use the Jump to amend link to start the amending process. Be sure to save a copy of your return before amending it.
If taxpayer repays money that was included in gross income in a previous tax year because at the time it appeared that the taxpayer had an unrestricted right to the income (Claim of Right, IRC Section 1341), and the repayment is deductible (for example as a business expense or an IRC Section 165 loss), then the taxpayer may (1) deduct all or part of the amount for the year in which it is repaid or (2) take a refundable credit against tax for that year. If the repayment is not deductible, then IRC Section 1341 is not available. The manner in which the deduction is taken depends upon the:
Note: The change in income will be reported on the same form that was initially used, such as Form 1099. For Cancellation of Debt, the form will be a Form 1099-C, Cancellation of Debt. To see full instructions regarding reporting a Claim of Right, click on the link. If not taken directly to that section, use Ctrl+F to search for 'claim of right' on that page. Although I do believe the link will go directly to that section. @ChachClark
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