Deductions & credits

To reclaim the taxes, since the amount was more than $3,000, there are two options,

Option 1: Request the former employer issue a corrected Form W-2C for 2019, removing the bonus that has not yet been subtracted. This will require amending 2019. See: How do I amend(change) a prior year?

Option 2: For 2020, file for a Section 1341 Claim of Right as either a deduction or a credit.

To enter a deduction in TurboTax Online if you are itemizing your deductions: 

• From the left menu, select Federal.
• At Deductions and Credits, scroll down to Other Deductions and Credits and click Show more.
• Other Deductible Expenses click Start

To enter a credit, you will need to convert to TurboTax CD/Download.

After the return has been converted, go to Forms Mode. Scroll down to 1040/1040SR Wks. Enter the amount of tax, which is 22%, on Schedule 3, Line 12d under Other. See the screen shot.

TurboTax explains: 

Schedule 3, Line 12 - Other Credits and Payments Smart Worksheet:

Line D - if you have a repayment treated as a credit, enter the amount allowable here. The program includes the amount on line 13, checks box 13d, and prints the text "I.R.C. 1341" to the right of box 74d. See Pub 525.

For more information, see: How Bonuses Are Taxed, and IRS Publication 525 Taxable and Nontaxable Income page 34 regarding Claim of Right.

See this IRS Customer Account Services for Specific Claims and Other issues for an explanation of both options.