Repayment of Social Security Income when Repayment Occurs in a Subsequent Year; I have income this year from Social Security and have received their 1099. However, I have submitted SSA Form 521, Withdrawal of Application in which when approved I will pay back all my income I received in 2015 in year 2016. How should this be treated? I notice on the SSA-1099 that they do allow for Benefits Repaid - Box 4. Should I report the income on this year's return and make sure the correct entry is recorded on next year's 1099 or record this in some other way?
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First of all, you do report the amount received in 2015 as shown on your SSA-1099.
For 2016, your repayments will create a situation known as a Claim of Right tax issue. Please see this link: https://www.irs.gov/publications/p17/ch11.html#en_US_2015_publink1000171933
If you pay back less than $3000, you will deduct your repayments as a Miscellaneous Deduction on Schedule A.
If you repay more than $3000, you have the option of taking a tax credit under IRC Section 1341 for the year of repayment. Please see these answers for instructions on how to do that in TurboTax for next year.
https://ttlc.intuit.com/replies/3730631
https://ttlc.intuit.com/replies/3730815
First of all, you do report the amount received in 2015 as shown on your SSA-1099.
For 2016, your repayments will create a situation known as a Claim of Right tax issue. Please see this link: https://www.irs.gov/publications/p17/ch11.html#en_US_2015_publink1000171933
If you pay back less than $3000, you will deduct your repayments as a Miscellaneous Deduction on Schedule A.
If you repay more than $3000, you have the option of taking a tax credit under IRC Section 1341 for the year of repayment. Please see these answers for instructions on how to do that in TurboTax for next year.
https://ttlc.intuit.com/replies/3730631
https://ttlc.intuit.com/replies/3730815
Thank you for the guidance. I have a similar situation that spans two years. SS that was received in 2019 and 2020 was repaid in 2021. Am I able to take the credit for both 2019 and 2020? If so, do I need to wait to do this until 2021?
Yes, the repayment of social security must be used on the year of repayment if it was included in taxable income in an earlier year. If the repayment is greater than $3,000 that was previously included in income then you can follows the steps below in 2021, when the repayment actually occurs.
Note: As of 2018, under the Tax Cuts and Jobs Act (TCJA), there is no longer any deduction for amounts that are repaid of $3,000 or less.
Claim of Right
Follow the steps below for the method you have selected.
Taking the Income Reduction in TurboTax
Taking the Credit in TurboTax
There are two components to taking the credit in TurboTax. The first part entails determining the amount of the tax that was overpaid in the year the income was actually received. This requires using the TurboTax Desktop product (or another method) to determine what the tax liability would have been without the income.
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