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Level 1
posted Jan 25, 2021 6:59:19 PM

Repayment of Third Party Sick payment in 2020 reported as W2 Earnings in 2019,

I was required to pay back Third Party Sick Pay that I received in 2019 once my Social Security Disability Benefits were approved and I received a lump sum from SS.   I have read Publication 525 and understand that since the amount is over $3,000 I can either use Method 1 which takes a deduction on Schedule A for the amount paid back - (I have figured out how to do this) or Method 2.   However, Method 2 allows instead for a tax credit of the difference in tax due for 2019 with and without the paid back money.    Since Method 2 is to my advantage I need to figure out how to enter this in Turbo Tax.    I know it needs to come from Schedule 3 but don't know how I go about entering this in Turbo Tax.    I have Turbotax Premier edition.

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1 Best answer
Expert Alumni
Jan 26, 2021 3:00:26 PM

Yes, you can claim a credit under IRC 1341, Claim of Right by following the steps below:

  1. Login to TurboTax desktop version.
  2. Click on Forms in the upper right hand of the screen.
  3. Scroll down on the Forms in my Return column on the left hand side and click 1040/1040 SR WKS.
  4. Scroll down all the way on the 1040/1040 SR WKS until you get to Other Payments and Credit Smart Worksheet at the bottom of the page.
  5. Enter the amount on Line D, Claim of Right, IRC 1341.
  6. Click on Step by Step in the upper right hand of the screen.

See link, Claim of Right, for more information.

4 Replies
Expert Alumni
Jan 26, 2021 3:00:26 PM

Yes, you can claim a credit under IRC 1341, Claim of Right by following the steps below:

  1. Login to TurboTax desktop version.
  2. Click on Forms in the upper right hand of the screen.
  3. Scroll down on the Forms in my Return column on the left hand side and click 1040/1040 SR WKS.
  4. Scroll down all the way on the 1040/1040 SR WKS until you get to Other Payments and Credit Smart Worksheet at the bottom of the page.
  5. Enter the amount on Line D, Claim of Right, IRC 1341.
  6. Click on Step by Step in the upper right hand of the screen.

See link, Claim of Right, for more information.

Level 1
Jan 28, 2021 9:03:22 AM

Thank you -with instructions on where to enter I had no problem.   Many thanks

Returning Member
Mar 16, 2022 6:54:26 PM

What amount do you put on line D? The whole amount that you paid back?

Expert Alumni
Mar 16, 2022 7:21:05 PM

You put the amount of the change in your tax on line E of the Other Credit and Payments Smart worksheet (claim of right credit.)

 

You first must determine how much your repayment of income affected your tax in the prior year and then you enter the change in your tax in that year on the Other Payments Smart Worksheet in the year you payed back the money.

@neeter83