Repayment of social security benefits in 2023 for benefits received in 2022

[fstadler]

I withdrew my application for social security benefits in 2023 as I returned to work.

So that I may claim/file again later and receive a higher benefit, I repaid the full amounts received in 2022 and 2023.  This was a total of $29,648 of which $10,216 was my distribution in 2022.

I am very confused on how to claim a credit for the 2022 distribution for which I paid taxes in my 2022 return.  I followed the advice given to others by Turbotax and the result in not changing my tax obligations.  I am taking the standard deduction as I have very little to itemize.... hopefully this doesn't prevent me for getting credit this year for repaying the distribution made in 2022.

Thank you, FS 

[KrisD15]

First, if this all happened in 2023, your SSA-1099 would report the repayment in Box 4 which would be subtracted from the amount paid in Box 3 to get what you need to claim reported in Box 5.

Since you also repaid benefits received in 2022, Box 4 should still show the amount repaid, but if this is more than Box 3, Box 5 will be negative- you paid back more in 2023 than you got in 2023. 

This means that you claimed income for an amount in 2022 that you paid back in 2023 and there are two ways to figure the repayment for this 2022 amount, a DEDUCTION or a CREDIT. 

The deduction means you subtract the amount you repaid in 2022 from your income of the current tax return, in your case 2023.  In other words, you paid back 10,216 in 2023 for income that you paid tax on in 2022, so if you made 20,000 in 2023, you subtract 10,216 from that 20,000. This is done by Itemizing Deductions on Schedule A.

It is done by following the steps and going to 

Other Deductions and Credits

Other Deductible Expenses

The problem with that is the fact that you also have the option to claim the Standard Deduction, so Itemizing might be a waste of that repayment, which sounds like your issue. 

The next way is to take a credit. 

INSTEAD of SUBTRACTING the amount repaid, you figure 

"How much did I pay in tax when I did get that money in 2022?"

"What would my tax liability have been if I never got that money in 2022?"

Subtract those amounts for the difference. 

Claim the difference as a credit in 2023. 

So if your 2022 tax liability for 2022 was 3,200 with the 10,216 in social security, but WOULD HAVE BEEN 2,300 if you did not get the Social Security, your credit would be 900.  

This cannot be done in TurboTax Online. 

You must figure this credit yourself by making a "mock 2022 return" with the reduced income, then transfer the credit to a return using TurboTax Desktop. You will go into the form and enter the credit. 

Here is a link to tell you how to do that. Be sure to select "Taking the credit"

It is complicated. I suggest you first do that "mock" 2022 return to see how much the credit is worth and if it is worth the hassle to report it. 

Pub 525  page 37 

Pub 915  page 15

[fstadler]

Hi Kris D,

Thank you this is very helpful!

My only question now is that when I calculate the credit, how do I enter that in TurboTax given I am not itemizing?

Your reply below references a link that I am not seeing:

"Here is a link to tell you how to do that. Be sure to select "Taking the credit""

Please advise & thanks again!

[fstadler]

Just noticed in your initial response that claiming/entering the credit resulting from doing a "mock 2022 return" will not be possible using TurboTax online.  Did I understand this correctly?

If so, using TurboTax desktop, can you provide instructions on how to enter the credit amount I've calculated?

Thank you!

[DawnC]

To enter the amount of the credit in TurboTax desktop, you will click on Forms.   Return to the current tax year (The credit can only be applied using the Forms mode in the TurboTax CD/Download product).

• Select the Forms icon.
• Choose 1040/1040SR Wks from the list on the left and the worksheet will appear.
• Scroll down to the Other Credits and Payments Smart Worksheet (you can find this in a box near the end of the worksheet).
• Enter the credit amount you calculated on Line D, Claim of Right, IRC 1341 credit for repayments of prior year income.
• 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.

For full instructions, please see the Claim of Right help article linked here.