Help with Right of Repayment entry as a deduction

[Secord3788]

Please explain how to resolve the bug when using Turbo Tax online to enter a Right of Repayment deduction so that it is not reflected as unemployment and is correctly reflected on the appropriate tax forms as a deduction?

I have refunded more than $3K in 2024 for LTD benefits paid out and reported as income in 2023 and 2022.  This is over $40K and I want to make sure it is captured correctly.  Others reported a software bug for this issue going back to 2021 and were unable to correct it.  It appears the issue may still not be resolved.  Please advise.

[DianeW777]

The claim of right repayment has worked in TurboTax for many years.  Please use the steps below to enter your income reduction.

Taking the Income Reduction in TurboTax

1. Login to your TurboTax account or open your tax return.
2. Click on Tax Home and then Deductions & Credits.
3. Locate the section Other Deductions and Credits (you may first need to click on show all tax breaks if working online or I’ll choose what I work on if working in the installed desktop version.)
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.

• What is a claim of right repayment?

[Secord3788]

I have followed the steps outlined and the deduction entry then shows as a negative amount under "unemployment" income.  This is the reported bug.   How can the entry under unemployment income be removed while still reflecting the correct deduction?

[IsabellaG]

When I enter a Claim of Right Repayment as DianeW777 has outlined, I do not see a negative amount under "unemployment" income. Instead, I see an Itemized Deduction on line 16 of Schedule A noted as Claim Repayments. 

If you are still seeing an incorrect entry on your return, I would like to take a deeper look at this. However, I need a diagnostic file, which is a copy of your tax return that has all of your  personal information removed. You can send one to us by following the directions below:

TurboTax Online:

1. Sign into your online account.
2. Locate the Tax Tools on the left-hand side of the screen. 
3. A drop-down will appear. Select Tools  
4. On the pop-up screen, click on “Share my file with agent.”
5. This will generate a message that a diagnostic file gets sanitized and transmitted to us.
6. Please provide the Token Number that was generated in the response.



 

[Secord3788]

Thank you.  I viewed the actual printed 1040 tax form and the right of claim repayment deduction is populated in the corrected field.  The online tool still shows a negative dollar amount in the unemployment income field but this doesn't appear to carry over to the tax forms.  Very confusing.  

[Hal_Al]

This situation is described in IRS Publication 525.  If the amount is more than $3000, you can take a itemized deduction, on line 16  of schedule A (not subject to the old 2% of AGI rule) or  you can take a credit. The credit is computed by re-figuring the tax from the previous year as if the income had not been received. Then the difference in tax is claimed as a credit on the current year's return.  TT does not do the credit calculation or compare it to the alternate deduction. You have to do that manually. You enter the credit in the forms mode (the forms mode is not available in the on-line versions of TurboTax [TT]). All entries that seem like you should be able to enter on Form 1040 or Schedules 1 through 3 have to be entered on TurboTax's 1040 Worksheet. Scroll way down to Other Credits and Payments Smart Worksheet. Select item E, claim of right under IRC 1341 for repayments. It ends up on line 13b of schedule 3 (2024).

All entries that seem like you should be able to enter on Form 1040 or Schedules 1 through 3 have to be entered on TurboTax's 1040 Worksheet. Scroll way down to Other Credits and Payments Smart Worksheet. Select item E, claim of right under IRC 1341 for repayments. It ends up on line 12d of schedule 3 (2020 forms and worksheets).  It's not clear yet if this will work for the 2021 software.  It appears the credit will go on line 13z of the 2021 Schedule 3.

 So, the taxpayer  has the option of either claiming the credit or deducting the repayment as an other itemized deduction, whichever provides the greater benefit.  But, you cannot file an amended prior year return.  If the amount is less than $3000, there is no tax relief available.

TT support article

https://ttlc.intuit.com/turbotax-support/en-us/help-article/taxation/claim-right-repayment/L0aW5v3Tp...