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I'm guessing that the lump sum you are referring to is Social Security. You will need to report your Social Security, but the repayments are handled a little differently.
When you are entering your social security income, on the next page you will be asked if you received a lump-sum payment in 2016 for 2015 or prior years. Turbo Tax will ask you which year, the amount for that year, etc.
Please take a look at the following information:
As far as the repayment of your disability income goes:
The Claim of Right allows you to take a deduction (or credit) for repayment of income that was taxable in a prior year. If you don’t itemize, that won't be helpful to you!
IF you pay back less than $3000, the repayments are deductible on Schedule A (subject to the limitation of 2% of your Adjusted Gross Income.)
To report the repayment:
- Log into your return
- Click on Federal Taxes
- Click on Deductions and Credits
- Scroll to Other Deductions and Credits.
- If needed, click on the Show more button.
- Click the button next to Other Deductible Expenses
- The first screen after this does not apply to you for this question.
- On the next screen, you will be asked if you have any of the less common expenses. (One of the expenses listed is the repayment of $3000 or less.
- On the following screen, you can enter a description and amount.
If you paid more than $3000 and prefer to take a deduction on your Schedule A:
- The next screen after the instructions above asks if you had Right of Repayment MORE than $3000.
- Click yes, and then enter the amount you repaid.
- IF you pay back more than $3000, you have the option of taking a tax credit in 2016 (the year of the repayment).
To calculate and claim the credit you would need to use TurboTax CD/Download, because the amount has to be entered in Line 73, box d of your Form 1040. Per IRS instructions from the Pub 17:
"If you are claiming a credit for repayment
of amounts you included in your
income in an earlier year because it appeared
you had a right to the income, include
the credit on line 73. Check box d
and enter “I.R.C. 1341” in the space
next to that box. See Pub. 525 for details
about this credit."
Click on this link: https://www.irs.gov/pub/irs-pdf/p525.pdf
Go to page 34 and start reading at repayments. It seems that you have to recalculate what your tax would have been if the income you repaid wasn't included when you originally filed. Then take the difference between 1) the taxes you actually paid with the income included and 2) the taxes you would have paid if the income hadn't included the repayment amount.
Enter the difference as a credit on Line 73, check box d and indicate I.R.C. 1341.
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