2020 unemployment repaid in 2021 will no show up as an adjustment on Form 1040, Schedule 1, line 7 because the original amount was received in a different year.
IRS allows you to either deduct or take a tax credit for a “claim of right” of more than $3,000. If you entered a repayment in the unemployment section of TurboTax, it will show up as an itemized deduction on Schedule A, line 16 as Claim Repayments.
Claiming a tax credit often works out better.
You can claim a credit using TurboTax CD/Download instead of entering the repayment as a deduction.
- Calculate what your tax would have been in 2020 had you repaid those benefits in 2020
- Tap Forms in 2021 TurboTax CD/Download
- In Forms in My Return, select 1040/1040SR Wks
- Go down to Schedule 3, Part II
- Find the Other Credits and Payments Smart Worksheet between lines 12 and 13
- Enter the tax difference on Line E Claim of Right, IRC 1341 credit for repayments of prior year income
- Tap Step-by-Step in the top right to get back to the interview mode
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