Repayments of Taxable Income Paid Prior to 2023

[TaxUser168]

Company A: 2022 W-2 with the wage 15000

Company B: 2023 pay me 5000 with form 1099

2023: After receive this 5000 from B, have to pay the same 5000 back to A

At the 2023 tax return, pay tax for the money from B but have to reduce
the income wage from 15000 to 10000 for A. Otherwise, the same 5000 will
be taxed double times (2022 and 2023).

How to do the 2023 TuroTax for this repayment of taxable income?

Thanks

[ee-ea]

See this IRS info

https://www.irs.gov/publications/p525#en_US_2023_publink1000229600

[Mike9241]

can you clarify why company B paid you in 2023 as a nonemployee - this can cost you about $700 in self-employment taxes and is not proper if you were an employee. also why do yo have to pay back company A the money?

the short answer if everything is on the up and up (a w-2C should be issued for 2022 showing the reduction in fica and medicare wages and taxes). also there are two options for the repayment.  5K less the social security and medicare taxes you paid on that $5K. if the company refuses you'll have too file form 843 to recoup those taxes

as for the income taxes paid in 2022

recompute the taxes for 2022 by reducing box 1 of the W-2 by the $5K gross pay.
if the repayment occurred in 2023 the decrease in taxes is taken as a credit on 2023 schedule 3 line 13b

if the repayment occurred in 2024 you'll have to wait to claim the credit on your 2024 return. You can not amend 2022 or take the credit in 2023.

[TaxUser168]

(1) Can change the "Company B" to "SSA". So I am not receiving the SSA-1099 as a employee

(2) Receive a corrected W-2 statement from Company A but only including social security and medicare wages and withheld. So plan to file an 2022 tax amendment to update social security and medicare wages and withheld

(3) The repayment occurred in 2023. Assume the tax was $4K when the income wage was $15K at 2022, say the recomputed tax is $1K when the box 1 of the W-2 becomes $10K. So is it right I can claim the $3K credit by adding the number to the schedule 3 line 13b of the 2023 return?

Thanks

[TaxUser168]

(1) Can change the "Company B" to "SSA". So I am not receiving the SSA-1099 as a employee

(2) Receive a corrected W-2 statement from Company A but only including social security and medicare wages and withheld. So plan to file an 2022 tax amendment to update social security and medicare wages and withheld

(3) The repayment occurred in 2023. Assume the tax was $4K when the income wage was $15K at 2022, say the recomputed tax is $1K when the box 1 of the W-2 becomes $10K. So is it right I can claim the $3K credit by adding the number to the schedule 3 line 13b of the 2023 return?

Thanks

[AmyC]

1. The 1099 should be entered and you need to mark that it is not for work, only for 2023. Otherwise, it turns into business income.

2. The corrected w2 shows reduced Medicare and Social security wages. Did you get a refund for taxes paid in? If not, you need to request them.   you may need to file Form 843for Medicare and Social Security taxes to be refunded, also in Pub 525 just below the example. About Form 843, Claim for Refund and Request for Abatement & About Publication 525, Taxable and Nontaxable Income

3. Yes, the IRC 1341 shows on sch 3 with the difference in tax liability. Your state may allow the deduction. There are nine states, including Arizona, Georgia, Kansas, Maine, Massachusetts, Minnesota, Missouri, New York, and Virginia, along with the District of Columbia, have a similar deduction.