Retroactive adjustment allows you to deduct this year for the difference when it was earned. Following the IRS example, you will:
- write down your total tax liability in 2022.
- redo your 2022 return subtracting out the repaid income
- write down your new tax liability
- subtract the two liabilities to determine the credit allowed on your 2024 tax return. This will be marked IRC 1341, (Internal Revenue Code and section).
To enter it, follow the steps in What is a claim of right repayment?
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