Where do you enter a Certificate for income tax adjustment?

[londonsdad0525]

I paid the government back for a over payment. Where do I enter this information?

[Anita01 · Accepted solution]

If this is an amount of income you reported and paid tax on in a previous year, you would enter it as an Other Deductible Expense.

You would sign back into your return and select Federal Taxes and Deductions and Credits beneath that.

If you have already been through this section, you'll see a list of deductions and credits that apply to you.  The one you want is an uncommon deduction so you would likely have to select that you want to be shown more deductions and credits.  Keep going until you see one titled Other Deductible Expenses.

If you haven't been through that section you may be asked to choose what you want to work on after selecting Deductions and Credits and that would be most convenient.  If choose what you want to work on, you'll see a longer list of topics.  You can then scroll down to the Other Deductions and Credits topic, and select Other Deductible Expenses below that.  

Either way, once you're in that interview, you'll come to a screen titled Less Common Expenses.  If your repayment was less than $3,000, say Yes.  If more than $3,000 say No and continue to the next screen asking about amounts not subject to the 2% limitation.  You'll choose that this is a claim of right and enter your amount.

There is another way you can receive a credit for this, rather then a deduction, but you would need to switch to the Desktop/CD product and you would need to do a fairly difficult calculation yourself and enter it on the 1040.  It's rarely used, so we don't support doing the calculation and entries for you.  If you're interested in that and willing to switch products, let me know and I'll add more instruction on that.

If you're not able to follow my instructions for whatever reason, please post back and I'll see what I can clarify.

[grgloster]

In fixing error on my IN State return, I was told to check this entry:  "Sch IN-OCC:  Certification Year-1 must be entered."  There is a box below to fill in with the year.  but I have no idea what this is talking about

[RJAnni]

I tried this solution, but since I am only getting a standard deduction it doesn't seem to have made my tax due v. refund for 2019 change.  I paid more than $8K in income back in 2019 for 2018, and therefore, overpaid at least $1200 in Federal Tax which was withheld.  I have the certificate for income tax adjustment and I do have the CD/Desktop version. I'd love the solution for the entry and calculation as a credit on the 1040.

[DaveF1006]

According to this Turbo Tax trusted source, you can claim this by going through these steps in your return.

1. Go to federal>deductions and credits>other deductions and credits
2. Other Deductible Expenses>start
3. Say no to the first two questions that appear on the screen.  Scroll until:
4. You reach a screen that says: Did you have any of these other expenses?
5. Select Claim of right repayment over $3,000
6. In the next screen, you will select Claim of right repayment over $3,000 and record the amount.

Please note this is an itemized deduction so if you have other itemized deductions in your return that offset your standard deduction, you will see a difference in your return. If it doesn't make a difference, it means you may not have enough itemize deductions that will offset your standard deduction reported in your return.

[Roddyrue]

Was there ever any link to the formula for the 1040 form? I am in this situation this year for income readjusted last year.  Claiming as itemized or right to claim isn’t going to help me much. Letter also states I can use amount to compute a credit against my tax liability. I think this is the formula? Any direction would be stellar!

[ThomasM125]

You would have to re-compute your tax for the year the repayment applies to. You can do this by preparing an amended return in TurboTax. Just look for the Amend (change) option in Your tax returns & documents on your home page when you log into your TurboTax program. 

The amended return will show a refund amount that will be the amount of your credit. You can reverse the amended return after you are done so you won't disturb the original return copy in TurboTax.

[ChachClark]

I have the desktop version and would love to know how to do the difficult calculation and claim a credit.  Can you possibly lead me to documentation of how to do it?

[DawnC]

You can prepare an amendment in the desktop software to figure the amount of the credit just like you can do using the instructions above for online returns.   In the desktop program, search for amend and then use the Jump to amend link to start the amending process.   Be sure to save a copy of your return before amending it.  

If taxpayer repays money that was included in gross income in a previous tax year because at the time it appeared that the taxpayer had an unrestricted right to the income (Claim of Right, IRC Section 1341), and the repayment is deductible (for example as a business expense or an IRC Section 165 loss), then the taxpayer may (1) deduct all or part of the amount for the year in which it is repaid or (2) take a refundable credit against tax for that year. If the repayment is not deductible, then IRC Section 1341 is not available. The manner in which the deduction is taken depends upon the:

• Type of income included in the previous year

• Amount of repayment

• Accounting method

Note:  The change in income will be reported on the same form that was initially used, such as Form 1099. For Cancellation of Debt, the form will be a Form 1099-C, Cancellation of Debt.  To see full instructions regarding reporting a Claim of Right, click on the link.  If not taken directly to that section, use Ctrl+F to search for 'claim of right' on that page.   Although I do believe the link will go directly to that section.    @ChachClark

[Taniag9]

I don.t understand do i report this on my 2021 tax, because the certificates for income tax adjustment was for 2020

[ThomasM125]

@Taniag9 You report the adjustment in the year you pay the money back or receive a payment, as is applicable. 

[Ali37]

If I go in and amend the prior years tax form- what exactly am I amending? Do I subtract the amount on the certificate from my total income and let the software recalculate the tax owed? And then the difference between old tax owed and new tax owed is the credit amount? 

[BillM223]

Yes and Yes. But you will need the 2020 CD/download software for your 2020 taxes to do steps #1 and #2, and the 2021 Cd/download software to do step 4.

You can read what the IRS says about this on page 36 in Pub 525.

Method 2.

Figure your tax for the year of repayment claiming a credit for the repaid amount. Follow these steps.

1. Figure your tax for the year of repayment without deducting the repaid amount.

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

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 the year of repayment figured without the deduction (step 1). - do this by using Forms mode on your current return to make an entry on line 13d on Schedule 3 (1040).

In this year's TurboTax, there is no other way to get a number on line 13d.

@Ali37