I had to pay back relocation expenses to my previous company when I switched jobs in 2017. Can I claim this expense on my 2017 tax return?

It depends. If the moving expenses paid by your employer were not taxed, then you can't take a deduction.

If you did pay tax on these payments, then this situation is referred to as a Claim of Right under IRC Section 1341. It can be claimed as either an itemized (miscellaneous) deduction or as a credit if the amount repaid is more than $3000. The deduction is the simpler way to claim your repayment, but a credit might save you more money.

To claim the repayment as an itemized deduction, you would use TurboTax Online Deluxe or a higher version.

1. Click on Federal Taxes on the left side of your screen.
2. Click on Deductions and Credits.
3. Select All Tax Breaks, and scroll down to Other Deductible Expenses.
4. On Did you have any of these less common expenses? say Yes.
5. If your repayment was less than $3000, enter the amount and description on the screen Tell us about your less common expenses
6. Continue to the screen Did you have any of these other deductions? If your repayment was more than $3000, answer yes.
7.  Enter the amount on the next screen.

If you decide to claim your repayment of over $3000 as a credit, follow the information starting on page 33 of IRS Publication 525 Taxable and Nontaxable Income under Repayments. This requires a special computation, and you would need to use a Desktop version of TurboTax and enter your credit using the Forms mode.

which desktop version of turbo tax will support the calculation required to take the repayment of over $3000 as a credit? will the Turbo Tax deluxe desktop version work?

Yes, any desktop version would work. You will need to access Forms mode to work directly in the forms, rather than the Step-by-Step method. You do that by clicking the Forms icon in the upper right hand corner of your screen (left side for MAC.

@IsabellaG  thanks for this! your logic makes sense, but I'm worried that this won't work anymore because:

1. The TCJA eliminated the miscellaneous itemized deduction on Schedule A  line 28. Does this mean this deduction method won't work anymore?

2. my relocation expenses were taxed at income tax, but according to this article, relocation payback is not eligible for section 1341

https://www.worldwideerc.org/article/repayments-under-us-payback-agreements-no-longer-deductible/

what are your thoughts on this? Would love to hear them as I am in the same predicament! @dennisjemmatty 

Hi, 

Hi, I am leaving my current employer and I must pay back my relocation package to him that i got in 2019. If I pay back the full amount (included taxes Gross-Up – Federal, Gross-Up – FICA and Gross-Up – Medicare). How can I get a credit for those taxes gross-up? they are more 3K. they are including in my W2 as wage (line 1). Please provide help

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@carf01 wrote:

Hi, 

IsabellaG

Hi, I am leaving my current employer and I must pay back my relocation package to him that i got in 2019. If I pay back the full amount (included taxes Gross-Up – Federal, Gross-Up – FICA and Gross-Up – Medicare). How can I get a credit for those taxes gross-up? they are more 3K. they are including in my W2 as wage (line 1). Please provide help

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If you paid back the income you received in 2019 then you can report that on your 2019 tax return.  If the income is paid back in 2020 then that would be reported on your 2020 tax return.

When were these funds paid back to the employer?

i am going to pay back in 2020, but will i get a credit in my taxers for 2020? . Which form need my employer give me , for example W2 with negative wage, ?

thanks a lot for the information 

You will have to ask your employer if they will be deducting the repaid amount on your 2020 W-2.

If not then you can claim the amount repaid on your 2020 tax return to be filed in 2021.  It can be entered either as an itemized deduction on Schedule A or if the amount repaid is over $3,000 then as a credit on your tax return.

Repayment over $3,000.    If the amount you repaid was more than $3,000, you can recover the tax you originally paid using one of two methods. You can do it as a deduction on schedule A or a tax credit on line 18d of the 1040 form if when you included the income in a previous year, it appeared that you had an unrestricted right to it.

Figure your tax under both methods and compare the results. Use the method (deduction or credit) that results in less tax.

Method 1.    Claiming a deduction for the repaid amount. You deduct it as a miscellaneous itemized deduction on Schedule A  line 16.

This is the flow in TurboTax: 
Federal taxes > Deductions & credits > I'll choose what I work on > Other deductions and credits > Other deductible expense>Go thru to third screen> answer YES to "Did you have any other deductions that are not subject to the 2% limitation?"
Enter the amount you repaid under, "Claim of Right Repayment (Only if over $3,000).

Method 2.    Figure your tax claiming a credit for the repaid amount. Follow these steps.

1.      Figure your tax without deducting the repaid amount.

2.      Refigure your tax from the earlier year without including the income that you had to repaid.

3.      Subtract the tax calculated  in (2) from the tax shown on your return for the earlier year. This is the credit.

 This is the flow in TurboTax (This can only be done in the Forms mode of the Desktop version of TurboTax)

Go to FORMS (top right of main screen) > Form 1040 Worksheet > Scroll down to Schedule 3 Part 2 below line 12 to "Other Payments and Credits Smart worksheet"
Please enter the credit on line D. 
This credit should show up on Form 1040 line 18d
I've included a link to the IRS website for your reference: https://www.irs.gov/pub/irs-pdf/p525.pdf#page=34

 2 more questions:

1. hi, if my employer will be deducting the repaid amount on my 2020 W-2 but the repay is several time more than the amount earning in 2020 (i just worked January 2020 ). they can file a negative amount in my w2. 
2. Which documentation my employer needs to provide to me, for me to claim the amount repaid on my 2020 tax return to be filed in 2021, under the an itemized deduction on Schedule A or as a credit on my tax return

thanks a lot for your excellent orientation

@carf01 Doubtful that the employer can enter a negative amount on a W-2.  

The employer only needs to give you documentation of the taxable amount repaid.  It is your decision on how to report the repaid amount on a tax return.  Either as an itemized deduction or as a Credit.  The Credit would probably give you the best result from a tax standpoint.

1. "the employer only needs to give you documentation of the taxable amount repaid" you means an invoice or something like that . there is not a specific form from IRS  ??
2. What do you mean with " it appeared that you had an unrestricted right to it " in the text below? “ You can do it as a deduction on schedule A or a tax credit on line 18d of the 1040 form if when you included the income in a previous year, it appeared that you had an unrestricted right to it. “

thanks a lot

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@carf01 wrote:

1. "the employer only needs to give you documentation of the taxable amount repaid" you means an invoice or something like that . there is not a specific form from IRS  ??
2. What do you mean with " it appeared that you had an unrestricted right to it " in the text below? “ You can do it as a deduction on schedule A or a tax credit on line 18d of the 1040 form if when you included the income in a previous year, it appeared that you had an unrestricted right to it. “

thanks a lot

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1. You will need some type of documentation to prove that the amount was repaid if the IRS ever questions your tax return including the repayment.  A letter from the employer on their letterhead and a receipt for the amount repaid would suffice.

2.  That is what a "Claim of Right" is referring to - This means that at the time you included the income, it appeared that you had an unrestricted right to it.

What if i am exactly at 3K and my employer paid tax as "tax Assistance"?(please see attached image) Can I still claim a refund?

Thanks!

@rgaglani Yes, you can.  The deduction or credit is claimed on whatever amount the employer requires to be repaid that you claimed as income on the original return.  

@RobertB4444 So I had to pay back relocation expenses (WA to TX) $30k to my previous employer in 2021 because of not staying with them for 2 yrs and switching job. That's a huge amount. Is it tax deductible? Can you please let me know how I go about it. I am really stressed.. thanks

It depends. If the moving expenses paid by your employer were not originally taxed, then you can't take a deduction. If the $30,000 was included in income, then you could use a "claim of right" Section 1341 credit.  It can be claimed as either an itemized (miscellaneous) deduction or as a credit. The deduction is the simpler way to claim your repayment, but a credit might save you more money.

For an explanation of the methods and how to calculate your amounts for the Section 1341 credit, please see Publication 525 and go to page 36. Figure your tax under both methods and compare the results. Use the method (deduction or credit) that results in less tax.

To enter as an itemized deduction, please follow the instructions below:

1. Open your return.
2. Click on Federal.
3. Click on Deductions and Credits.
4. Scroll down to Other Deductions and Credits and Click Start next to Other Deductible Expenses.
5. Answer Yes to the question Did you have any of these other expenses?
6. Enter the amount. 

If you decide to claim your repayment of over $3000 as a credit, follow the information in Publication 525. This requires a special computation, and you would need to use a Desktop version of TurboTax and enter your credit using the Forms mode.

@cooltecho

Hi @LenaH and @RobertB4444  -

      I applied the standard deduction method for Bonus repayment to my employer, following the steps described below. Why does TurboTax show this amount in the following "wages&income section"? This was not repayment to the government .. it was repayment to my employer. Please Advise

Unemployment / paid family leave (1099-G)

Oh no! The credit is usually better but it is only available on the desktop. The deduction is also available on the desktop version. 

Use the desktop program. If you are online, easy to switch.   

• If you are online user, and have not purchased your software, simply buy the desktop version and download your .tax file so you don't have to do your taxes again. Any trouble, call support, link below. Here are desktop options.
• If you have paid for your online taxes, call support and tell them the desktop program is required.
• Please use the following link for a customer support number.

Applying the credit in the Desktop version

1. Return to the current tax year. (The credit can only be applied using the Forms mode in the TurboTax CD/Download product.)
2. Select the Forms icon.
3. Choose 1040/1040RSR Wks from the list on the left and the worksheet will appear.
4. Scroll down to the Other Credits and Payments Smart Worksheet.
5. Enter the adjusted amount of tax paid.
6. Enter the credit amount you calculated on Line E Claim of Right, IRC 1341 credit for repayments of prior year income.
7. Select 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.

References:

How to download TurboTax Desktop software from TurboTax.com

My deduction answer with pictures and guide.

My instructions for how to determine the credit.

@sansh76