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Amending a return; 1040X & revised 1040 show different amounts owed

So I'm amending a return from 2022 due to overpaid taxes from a repaid bonus in a different year (claim of right credit).  I initially owed and that amount was paid and accepted by the IRS.  When I go to amend the correct amount of refund is showing on the 1040X, but the new 1040 that is generated with the credit is now showing the refund to be net of the new amount owed to me and the amount that I paid with the original return.  Which figure will the IRS go by in processing the refund?   There is no where on the 1040X to indicate how I want my refund processed either by direct deposit or check.  The step by step instructions don't give the option for direct deposit.  So should I change this directly on the form?  Or are refunds from amended returns only returned by mail?  TIA

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5 Replies
claywallace
Employee Tax Expert

Amending a return; 1040X & revised 1040 show different amounts owed

Hello,

Good work on taking the initiative to amend your return.  However, let's back up a few steps and review your options as you would not need to amend your prior year return.

 

It appears you've found the correct tax code section for repayments found under IRC 1341 which is discussed in publication 525 here.  If you read this section, it's clear that you can tax a credit or deduction in the year of repayment.  It does not suggest that you should amend.  The reason for this is that you did indeed receive the income in the year it was overpaid, in this case 2022, and you did repay it in a different year, in this case I assume 2024.  You have a third option of deducting the income on the form where it was originally included in 2022.  This would apply to income other than wages so self-employment Sch C income or rental Sch E income etc.  If you are repaying wages, you will need to consider the deduction or credit option only.

 

If the amount of repayment is greater than $3000, you can calculate the tax impact of removing the income in 2022, as if you were amending, and the difference in tax can be taken as a tax credit on your current year return in 2024.  If the amount is less than $3,000, I'm afraid there is no refund you can claim because the deduction must be taken as a 2% miscellaneous itemized deduction and the passage of TCJA in 2018 eliminated this category of deduction for employees. 

 

As a side note, to answer your question in general about how amendments work, the 1040X will reflect the change in tax from the original 2022 return and the amended 2022 return which is attached to the 1040X ONLY.  The 1040X does indeed include in it's calculation any original refund or tax paid.  Since you already paid (or received a refund) of that amount, you get back any overpayment per the calculation on the 1040X.  Amendments are generally handled by paper although TurboTax is working on adding the efile option for even these returns.   You can included your routing and account number on the new 1040.  

 

Hope this helps.

 

Amending a return; 1040X & revised 1040 show different amounts owed

Thank you for your reply.  Just to clarify the bonus was received in 2021 and repaid in 2022.  I went round and round with the company to receive a corrected w-2 and/or pay back the net, but I had to pay back the gross.  I didn't have a solution by the time I had to file the 2022 return, so went ahead and filed, and figured I would find a way to amend.  The company did issue a corrected W-2 just to me without the bonus, so I was able to see what the difference was in unemployement taxes.  I would think an amendment would be the best path forward, because if I simply reduced my income, in the current year, it wouldn't match up with the current W-2 and would raise a flag to the IRS?  In addition, the tax rates might be different in a different year.  So I believe the claim of right credit in the year repaid is the right approach.  I appreciate your thoughts regarding the difference between the refund per the 1040X & revision per the 1040.  I so ahead with filing and hope for the best!  Thanks again.  

Amending a return; 1040X & revised 1040 show different amounts owed

Oh, and yes to clarify the amount of the bonus was in excess of $3,000.  

Amending a return; 1040X & revised 1040 show different amounts owed

@DLWit5   About the Amended return..........

The amended return will only be the difference you get back or need to pay. You can confirm this by printing your amendment and looking at the 1040X. Line 18 should be your original refund amount and line 21 should be your additional refund. If you paid on your original return it will be on line 16 (but don't include any penalty on 1040 line 38). If there is an amount owed with the amendment, it will be on line 20.

 

Ignore any 1040V voucher that prints out and the new 1040. Those are what your return would have been if you had not needed to amend.

claywallace
Employee Tax Expert

Amending a return; 1040X & revised 1040 show different amounts owed

Hello, thanks for the reply.  If the company issued a corrected 2021 W2, I would double check that it wasn't also reported to the IRS as it would be unusual to issue a mock W2C.  They could be adjusting boxes 3, 4, 5 and 6 on form W2C and not boxes 1 and 2.  I'm providing a link to a response to an alternate post that discusses a similar issue here.  If they did correct your FICA withholding as what occurred in this post, the correction will likely be reported to the IRS via employer forms 941 and 940 and the W2 and you may be due a refund of those witholdings.  If they only issued you a mock W2C, you would not need to amend.  So either way, you would not need to amend your 2021 return.

 

Since you are verifying that the amount was over $3,000, as you suggest, it would be appropriate to claim the credit under 1431 Claim of Right Repayment.  And since you already filed your 2022 return which was the year of repayment, you would need to amend for this reason as you missed taking this credit.   

 

Be sure to let us know if you have other questions.  Thank you!

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