There are tax consequences for your situation, but filing amended returns is not the way to handle it.
You have two pieces of income: 1. the reimbursement of interest deductions claimed in previous years and 2. forgiven loan money.
Enter the two items separately, in TurboTax (TT). They both end up on line 8 of Schedule 1.
You must declare the interest reimbursement, as income for the year you received it.
In TurboTax (TT), enter at:
- Federal Taxes tab (Personal in Home & Business)
- Wages & Income
Scroll down to:
-Less Common Income
-Misc Income, 1099-A, 1099-C
- On the next screen, choose – Reimbursed Deductions from a prior year
-On the next screen, choose Other Itemized Deductions (even though technically it was not an "itemized deduction")
You do not have to declare the loan forgiveness as income, unless you receive a form 1099-C for the amount forgiven.
In TurboTax (TT), enter at:
- Federal Taxes tab (Personal in Home & Business)
- Wages & Income
Scroll down to:
-Less Common Income
-Misc Income, 1099-A, 1099-C
- On the next screen, choose – Cancellation of Debt (form 1099-C).
