Above-the-line deduction - for tax payments

[BillL01]

Hi Experts,

I made a $4K payment in 2023 to my employer for a so-called TEQ (tax equallization) payment for my 2017 tax, where the employer filed their tax payment to the IRS and asked me to pay them back. But the payment wasn't made until last year due to they didn't ask them earlier.  My 2017 tax preparer was PriceWaterhouse, and they told me that this payment made in 2023 can be deducted from my tax last year, but need to enter as a "above the line" deduction.  After some searching online about how to enter this data, it appears that the TurboTax online premier version does not support this, and I'll have to use the desktop version.

So I'd like to verify this before I spending the money buying the desktop version, since I already paid for the online Premium version.  Can someone please confirm/deny that the desktop version can indeed allow me to enter this, or, if there's a way I can still enter this deduction in the Online Premium version? 

(Needless to say, it's just too bad that the paid Online Premium version does not support direct form entries, and I hope TurboTax can consider adding this feature in the future).  

Thanks a lot! 

[rjs]

An above-the-line deduction, officially called an adjustment to income, would have to be entered in Part II of Schedule 1. Do you know which line of Schedule 1 your above-the-line deduction has to be entered on?

[BillL01]

Thank you for the reply! 

According to PriceWaterhouse who did my tax then, it should be on line 16.  This was their reply to my question about this payment: "The TEQ repayment is considered a claim of right deduction, and is not entered into the return as a tax payment. It would be entered on the schedule A on line 16 as an "other itemized deduction"

Could you please tell me that:

 - 1: is there any way I could enter this in the online Premium version?  - such as enter as a different category in one of the other above-the-line data entries, but add an explaination to the IRS that the TurboTax online version lacks the direct entry capability - will IRS accept an explaination that way?

- If the above is absolutely not possible, will the desktop version allows me to do that?  There are two type of desktop versions: one is buying a CD, and the other is to download. If I use the download version, can I enter this using that version?

Thanks! 

[SusanY1]

A claim of right reduction is not an above-the-line deduction.  If you are itemizing, and wish to take the deduction, TurboTax online or the download version will work. 

You may also be able to claim a credit which may provide a more favorable result. 

TurboTax can do this in the download (or CD) version only. 

See this article for more information and detailed steps on how to take the deduction or the credit:

What is a claim of right repayment?

[BillL01]

"If you are itemizing, and wish to take the deduction, TurboTax online or the download version will work."

Thank you for your answer !  Could you please clarify or explain how to do this exactly using the online version? - which deduction item I can enter a TEQ payment?   

Since I already started with the Online Premium version, I'd like to just use it to complete my return if possible, and I am take itemized deductions.   

Also, if I use the deduction to clalim for this payment, what other proof do you think the IRS will require? - just the desciption text be enough, or attach the bank payment receipt (does TurboTax actually send our receipt files to the IRS?)

Thanks again!

[rjs]

Here's how to enter an itemized deduction for a claim of right repayment in TurboTax. (The deduction can only be claimed for a repayment of more than $3,000. You said you paid $4,000.) I offer no opinion on whether this is the proper way to report a TEQ payment, but these steps will let you enter a claim of right deduction on Schedule A line 16.

• Go to Deductions & Credits.
• On the screen "Your 2023 Deductions & Credits," scroll all the way down to the last section, "Other Deductions and Credits."
• Click the Start button for Other Deductible Expenses.
• The first screen asks if you paid generation-skipping taxes. If you didn't, click No.
• The next screen asks if you had any "less common expenses," one of which is a repayment of $3,000 or less. You repaid more than $3,000, so click No.
• The next screen asks "Did you have any of these other expenses?" One of the expenses listed is "Claim of right repayment over $3,000." Click Yes.
• On the next screen, enter the amount that you repaid in 2023 in the second box, labeled "Claim of right repayment over $3,000." Then click Continue.

The deduction will appear on Schedule A line 16 with the description "Claim repayments."

Do not send any receipts or other "proof" with your tax return. The IRS does not want explanations that are not required by IRS rules. The IRS instructions for Form 1040 say "Don't attach correspondence or other items unless required to do so." If the IRS wants more information they will send you a letter asking for it.