Hello! I work in insurance, and in 2021 I got paid for an insurance policy that was cancelled at a later date. A chargeback was issued, and a debt was created for the same amount that I got paid.
I got notice of this issue some time later, in 2022, and paid the debt off, but I still got a 1099 for this money paid to me, which I paid back to them. Can I deduct this chargeback debt paid in my 2021 tax return? Or must it go on 2022’s tax return?
Thank you for your time!
if you are a cash basis taxpayer as are most individual taxpayers you get the deduction when it's paid back.
however, I'm a little confused. you work on commission and normally when there's a chargeback, the insurance company would deduct it from a later commission check.
Yes, you are correct that they typically deduct it from a later commission, however I no longer do business with this particular carrier who originally paid me, so there were no more commissions.
Do you know what the penalty would be if I claimed it on last years tax return even though it was paid this year? The reason I’m asking is because I have my returns all ready to be mailed. Thanks again.