Claim of right over $3,000 Where do I enter in Turbo Deluxe?

[DoninGA · Accepted solution]

Since you repaid the taxable amounts in 2015, the amounts repaid are entered as an itemized deduction on Schedule A or as a tax credit on Form 1040 Line 73d as a Claim of Right IRC 1341, depending on the amount repaid.

To report the repayment of taxable income as an itemized deduction on Schedule A -

• Click on Federal Taxes (Personal using Home and Business)
• Click on Deductions and Credits
• Click on I'll choose what I work on
• Scroll down to Other Deductions and Credits
• On Other Deductible Expenses, click on the start or update button

On the next screen, click on No (Generation Skipping Taxes)

(If the repayment was $3,000 or less) On the next screen, click on Yes (Less Common Expenses) and enter a description and the amount repaid on the following screen.  Continue with this section until it completes.

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(If the repayment was greater then $3,000) On the next screen, click on No (Less Common Expenses)

On the next screen, click on Yes (Any Other Deductions)

On the next screen, enter the amount repaid in the box for Claim of Right repayment.  Continue with this section until it completes.

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If your repayment is greater then $3,000, instead of entering the amount repaid as an itemized deduction on Schedule A, you can enter a Claim of Right tax credit on Form 1040 Line 73d,  You will need to determine which method of reporting the repayment gives you the greater benefit.

This tax credit can only be entered directly on Form 1040, so you have to use the 2015 desktop editions as the online editions do not have the capability to enter tax data directly on a form, schedule or worksheet.  Using the desktop editions in Forms mode to access Form 1040 Line 73d and enter the tax credit in the Other Credits and Payments Smart Worksheet line D.

To figure the Claim of Right tax credit, use Method 2 in IRS Publication 525 Taxable and Nontaxable Income. page 34 - http://www.irs.gov/pub/irs-pdf/p525.pdf

[sophie18]

Thank you so very much!

[smccaig12]

You can either claim a deduction or a credit for this repayment.

Repayments

If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it. Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. In most cases, you can claim a deduction or credit only if the repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit transaction.

Type of deduction.   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. In most cases, you deduct the repayment on the same form or schedule on which you previously reported it as income. For example, if you reported it as self-employment income, deduct it as a business expense on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040).

Repayment over $3,000.   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained earlier under Type of deduction ). However, you can choose instead to take a tax credit for the year of repayment if you included the income under a claim of right. This means that at the time you included the income, it appeared that you had an unrestricted right to it. If you qualify for this choice, figure your tax under both methods and compare the results. Use the method (deduction or credit) that results in less tax.

When determining whether the amount you repaid was more or less than $3,000, consider the total amount being repaid on the return. Each instance of repayment is not considered separately.

Method 1.   Figure your tax for 2013 claiming a deduction for the repaid amount. If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28.

Method 2.   Figure your tax for 2013 claiming a credit for the repaid amount. Follow these steps.

1. Figure your tax for 2013 without deducting the repaid amount.

2. Refigure your tax from the earlier year without including in income the amount you repaid in 2013.

3. Subtract the tax in (2) from the tax shown on your return for the earlier year. This is the credit.

4. Subtract the answer in (3) from the tax for 2013 figured without the deduction (step 1).

  If method 1 results in less tax, deduct the amount repaid. If method 2 results in less tax, claim the credit figured in (3) above on Form 1040, line 71.

If you choose a deduction, please enter it here:

Federal taxes - Deductions & credits - I'll choose what I work on - Other deductions and credits - Other deductible expense 

Please answer YES to "Did you have any other deductions that are not subject to the 2% limitation?"

Please enter the amount you repaid under, "Claim of Right Repayment (Only if over $3,000).

If you choose a credit (This can only be done in the Forms mode of the Desktop version of TurboTax), please enter it here:

FORMS - F1040 - Below line 70 is the Other Payments and Credits Smart worksheet.

Please enter the credit in line D.

This credit should show up on F1040, line 71.

I've included a link to the IRS website for your reference:

http://www.irs.gov/publications/p525/ar02.html#en_US_2013_publink1000229600

I hope this resolves your question. If you need further help with this issue, please respond to this post.

[sophie18]

So appreciative.  Thank you!

[RA31]

What about state returns?  Can we claim the right of repayment credit (or deduction) on a state return, specifically for the District of Columbia?

[nachi-rulzz]

How does the claim of right (IRC 1341) rule apply for the State of California?

[parisrosaries]

I see a couple version of the Desktop, would I just be able to use the Deluxe desktop version to file a Claim of Right credit?

[Critter-3]

Of course ... follow the directions in the prior answers.

[parisrosaries]

Got it, thanks! Wasn't sure if it was necessary to upgrade to the Small Business Owners version.

[VolvoGirl]

All the Desktop programs have the same forms. You just get more help and guidance in the higher versions. 

[Opus 17]

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@Critter-3 wrote:

Of course ... follow the directions in the prior answers.

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For 2019, the IRC 1341 claim of right credit is entered on line 13 of schedule 3. The instruction about line 71 refers to a previous year's form 1040. 

[Anonymous_]

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@Opus 17 wrote:

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For 2019, the IRC 1341 claim of right credit is entered on line 13 of schedule 3. The instruction about line 71 refers to a previous year's form 1040. 

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Correct, and the figure must be entered on Line D of the Other Credits and Payments Smart Worksheet under Part II (Schedule 3) of the Form 1040 or Form 1040-SR Worksheet in Forms Mode.

[dogfeste]

I have found the relevant form in TurboTax Desktop.  However, it doesn't seem to allow me to enter a number in the field.  Any suggestions?

[macuser_22]

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@dogfeste wrote:

I have found the relevant form in TurboTax Desktop.  However, it doesn't seem to allow me to enter a number in the field.  Any suggestions?

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Not on the Schedule 3 form but on the 1040/1040SR Worksheet part II - Schedule 3