how to file amendment for payback of relocation allowance from 3 yrs ago

[swanguscmba]

Hello,

In 2020, my current employer offered and paid in advance of a relocation allowance that is great than $3000. With the Pandemic situation, my management agreed last year (2022) to let me continue work remotely.  As I did not relocate, Payroll is asking for the payback of this allowance....

I had reported and paid the tax in my 2020 Fed/CA filing and filed on time before April 2021.     Now, in 2023, Payroll said they will send me a letter of payback evidence for IRS after I they receive my one lumpsum payment and they will provide a letter for a backup document for IRS, but Payroll will not provide a revised 2020 W2.

Questions

- can I still file a 2020 Amendment some time in 2023?  Is it still within the 3 years limitation for filing amendments?

- since I won't get a 2020 W2-C from my employer (after I complete the payback in the next few months) and this allowance was taxed as my income in 2020,  where and how do I submit this allowance amount in my 2020 amendment filing?  Do I adjust the Box 1 of W2 entry in 2020 TurboTax amendment or as a deduction item somewhere?  (I used standard deduction in 2020 filing)

- Do I need to file an amendment for Fed and one for CA state in 2020?

- Do I also need to file amendments for 2021 and 2022 (for both Fed and State)? since the AGI from 2020 will be changed?

Thank you

[Mike9241]

your employer is correct. if you had paid it back in 2020 you would have gotten a corrected w-2. since the payback was in a subsequent year  IRC section 1341 is what controls your reporting. you do not amend  2020. When you do your 2023 return in 2024 this is the procedure:

You can either take the repayment as a deduction on Schedule A line 16 and label it as "IRC 1341 repayment" OR
recompute the taxes for 2020 by excluding the payment. The decrease in tax is taken as a credit on the 2023 Schedule 3 line 12d and labeled as "IRC 1341".

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note since the forms for 2023 are not out yet the location to report may be wrong. 

[swanguscmba]

Hello,

Thank you for your reply yesterday.   I like your suggestion of simply itemize an IRC-1341 deduction for the repayment in my 2023 Schedule A.    Then I realized that I usually take standard deductions (married jointly) which is higher amount than the payback amount $16k.  By taking the standard deduction, TurboTax will not include a Scheule A in my tax filing for 2023.    Is my understand correct that I won't be able to use the IRC-1341 deduction approach if taking standard deduction?

To be able to take Standard deduction (for Married/Jointly) in my 2023 filing, should I proceed with the second suggestion of taking tax credit in Schedule 3?  I can see the income tax amounts withheld specific to this relocation allowance from my 2020 paystub.

Will I include all tax amounts (Fed, CA, Medicare, Social Security) as one tax credit in my filing for 2023 ( Schedule 3?)   

Thank you