I am doing a claim a right salary repayment of $5K as a other itemized deduction on Sch A. TurboTax is including the $5K on line 10 of the 8960 - doesn't seem correct?

[kaytem]

The salary repayment (originally paid in 2020 and paid back in 2023) has nothing to do with investment income, so I don't understand why that would carryforward to the form 8960 - is this a TurboTax error?

[DianeW777]

It should not be an error. The requirements to file Form 8960 are show below.  Included below will be instructions on how to handle the claim of right.  

U.S. citizens and residents.

Individuals who have for the tax year 

(a) MAGI that’s over an applicable threshold amount, and 

b) net investment income, must pay 3.8% of the smaller of (a) or (b) as their NIIT.

The applicable threshold amount is based on your filing status.

• Married Filing Jointly or Qualifying Surviving Spouse is $250,000.
• Married Filing Separately is $125,000.
• Single or Head of Household is $200,000.

The Claim of Right is explained more in the article below.  However I will add some information here about how to report on your tax return to determine if it applies to you and how you prefer to enter it on your tax return.

• What is a claim of right repayment?

Taking the Income Reduction in TurboTax (most common)

1. Login to your TurboTax account or open your tax return.
2. Click on Deductions & Credits
3. Locate the section Other Deductions and Credits (you may first need to select on show all tax breaks if working online or I’ll choose what I work on if working in the installed desktop.)
4. Click Start (or Revisit) beside Other Deductible Expenses.
5. A number of questions will appear on the upcoming screens. You are looking for the one that reads Claim of right repayment over $3,000. Click yes when you see this screen. (Be sure to ignore the similar question, repayments of $3,000 or less.)
6. Enter the amount of the repayment in the box Claim of right repayment over $3,000 and click Continue.

Taking the Credit in TurboTax (Must use TurboTax Desktop)

There are two components to taking the credit in TurboTax. The first part entails determining the amount of the tax that was overpaid in the year the income was received. This requires using the TurboTax Desktop product (or another method) to determine what the tax liability would have been without the income. 

1. The credit can only be applied using the TurboTax Desktop product installed on a computer, in the Forms mode.
2. Switch to Forms mode by clicking on Forms icon in the program.
3. In the list of forms on the left click on 1040/1040RSR Wks above the Form 1040 itself.
4. Scroll down to Other Credits and Payments Smart Worksheet (near the bottom) and enter the amount that you have computed on Line D Claim of Right, IRC 1341 credit for repayments of prior year income.
5.  Click on the Step-by-Step or Easy Step icon in the upper right corner to return to the interview mode and finish working on your tax return.

[kaytem]

But TurboTax is subtracting the $5K salary repayment from my total investment income to arrive at the net investment income that the 3.8% tax is calculated on. So on Form 8960, my total investment income is on line 8, then on line 10 TurboTax is subtracting the $5K salary repayment, then line 12 is the Net investment income. Why would the salary repayment reduce my investment income?

[DianeW777]

It may have to do with the modified adjusted gross income (MAGI) as indicated below in the IRS FAQ about the Net Investment Income Tax (NIIT).

• For the Net Investment Income Tax, modified adjusted gross income is adjusted gross income (Form 1040, Line 37) increased by the difference between amounts excluded from gross income under section 911(a)(1) and the amount of any deductions (taken into account in computing adjusted gross income) or exclusions disallowed under section 911(d)(6) for amounts described in section 911(a)(1). In the case of taxpayers with income from controlled foreign corporations (CFCs) and passive foreign investment companies (PFICs), they may have additional adjustments to their AGI. See section 1.1411-10(e) of the final regulations. 

If you would like to send us a “diagnostic” file that has your “numbers” but not your personal information it would help.  If you would like to do this, here are the instructions: 

TurboTax Online:

Go to the black panel on the left side of your program and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number. 
5. Reply to this thread with your Token number and your state. This will allow us to open a copy of your return without seeing any personal information.  

TurboTax CD/Download:

If you like, you can send a copy of your return that will be scrubbed to eliminate your personal data by using these steps:

1. Click on Online in the top left menu of TurboTax CD/Download for Windows
2. Select 'Send Tax File to Agent'
3. Write down or send an image of your token number and state then place in this issue.
4. We can then review your exact scenario for a solution.
5. Please also tell us any states included in the return. This is necessary for us to view the return.

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution. 

@kaytem 

[Mike9241]

your choice in the year of repayment is to take it as an itemized addition which should appear on line 16 of schedule A or use the tax credit method. 

I agree the repayment is not part of investment income

in TurboTax desktop there appears a worksheet for the 8960

in part III it lists the repayment which should be zeroed out

***

I can't see a direct way to get to it in the interview process. so in the jump to box type 8960 and go to the wks?

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Turbotax warming on the page were the COR repayment is entered.

 "in some situations these amounts must be adjusted for the calculation of the NIIT. Turbotax DOES NOT SUPPORT THESE ADJUSTMENTS"

[kaytem]

I have TurboTax Online and it doesn't look like the online version supports the credit option, just the deduction option. And it doesn't let me drill down to the worksheet in the online version. I wish I would have known the online version wouldn't work to file my taxes - I would have bought the desktop version!