Yes, that's what we are saying. This assumes you pay tax on the money on your 2022 tax return, then the repayment occurs in 2023. However, if the repayment amount, after the corrected W2, is less than $3,000 in 2023 there will be nothing to report on your 2023 tax return. The claim of right (IRC 1341) is explained below.
Claim of Right
- If you had to repay an amount that you included in your income in an earlier year, because at the time you thought you had an unrestricted right to it, you may be able to reduce your income by the amount repaid in the current tax year if the amount you repaid is more than $3,000, or you may take a credit against your tax for the year repaid, whichever results in the least tax.
- IRC 1341
- Income Reduction or Credit will be your choice.
Be sure to use the corrected figures on your 2022 tax return from your W-2 and W-2c.
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