LenaH
Employee Tax Expert

State tax filing

You could use a "claim of right" Section 1341 credit, but only if the repayment was more than $3,000. This is a federal tax credit for taxpayers who reported income in the previous year, but have to repay the income because it was paid in error. The Section 1341 credit is found on your 1040, Schedule 3. 

 

For the method on how to calculate your amounts for Schedule 3, please see Publication 525 and go to page 35. Please keep in mind that these Section 1341 credits do tend to get audited, so it is important to keep all of your documentation in order in case the calculations get questioned. 

 

This credit is available on the state side as well. However, I am not sure which state you allocated the bonus with on your three state returns, so I would be able to instruct you with the state side of your question once I know the allocation used. 

 

To enter, please follow the instructions below:

  1. Open your return.
  2. Click on Federal.
  3. Click on Deductions and Credits.
  4. Scroll down to Other Deductions and Credits and Click Start next to Other Deductible Expenses.
  5. Answer Yes to the question Did you have any of these other expenses?
  6. Enter the amount in Claim of repayment over $3,000.

I have attached screenshots below for additional guidance. 

 

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