How do I amend my PA state return due to a claim of right?

[mijohn]

In my turbo tax desktop edition, I followed the instructions regarding how to amend our 2022 joint federal return due to a "claim of right" (my wife had to repay a retention bonus in 2022 that she received in 2021). The amending of the 2022 federal return worked fine by taking the refundable credit. However, it did not seem to carry over to the state return. Does anyone know if I have to actually change the gross compensation line 1a column C on the PA-40x?

In addition, her employer only required her to repay $5,541 (i.e., the $6,000 retention bonus less 6.2% for SS tax and 1.45% for Medicare tax), as the employer issued a W-2c showing the reduction of $6,000 for SS and Medicare wages in boxes 3 and 5 and the corresponding reduction in SS and Medicare tax withheld in boxes 4 and 6. Therefore, if I should reduce the gross compensation number on PA-40x line 1 column C, should I do so for the full $6,000 or the $5,541?

[AmyC]

Not all states allow the right of repayment. PA is one of them. If the employer reduced the state wages on W2 Line 16, then you can file an amended return for the change in income.

[mijohn]

Hi Amy, Thank you for your reply. Unfortunately, the employer did not reduce the state wages on the W-2c line 16. The only boxes that were corrected were Box 3 for SS wages, box 5 Medicare wages and tips, Box 4 SS tax withheld, and Box 5 Medicare tax withheld. 

Since you said that PA allows for these "claim of right" situations, are there any other solutions?

[AmyC]

My apologies for not being clear; not all states allow the claim of right, including PA. Since you can't file a claim of right, amending is the only option. You can ask if they will issue another corrected w2. I'm sorry it isn't better news. Each state has very different laws and you may be out of luck on the state level.

[mijohn]

Hi Amy, Thanks again for this quick reply. So, if the employer will not issue another W-2c with the new, reduced figure in Box 16, I effectively cannot amend, right? (Further still, even if they would, the W-2c would be for the 2021 tax year and I would be unable to amend due to an untimely amendment, as this would have to have been accomplished by the income tax filing deadline last year as three years from the original filing due date would have passed last year.)

[AmyC]

Right, 2021- it will be too late for PA. PA has a 3 year limit.