Hello, I need what details make up this in my 2024 tax as refundable tax credit of $5,500.00

[famuyide2003]

Please review your Maryland original return, The payment was received in the amount of $2,534.00 for balance due tax year 2024. However, you requested a refundable tax credit of $5,500.00 which was denied, that's the reason the notice was sent in balance due... Line 40 on Maryland 502. On 502CR IRC Section 1341 Repayment Credit. (See Instructions and Administrative Release 40.) Attach documentation. 5,500.00. Refundable IRC Section 1341 repayment tax credit has been disallowed. No supporting docs demonstrating you had overpaid income from prior year(s), and no proof of repayment. Amount requested was $5,500. If you are unable to provide supporting documentation as required previously the balance remains

[ThomasM125]

IRC section 1341 refers to a situation where you repaid income that you had received in a prior year. This is common for instance when you have to repay social security benefits you received in a prior year in error so you had to repay them in a future year. However, it could be associated with other repayments of income as well.

When this happens, you are allowed to calculate the tax that should have been paid in the year of overpayment and subtract from that the tax actually paid, and then subtract that difference from your tax in the year you pay back the income. In your case, it appears you entered $5,500 as the amount of tax overpaid in a prior year that you subtracted from your 2024 tax. Evidently, the State of Maryland is denying the credit subtraction from income.

If you were overpaid social security, it may result in a credit on your federal tax return but not on your Maryland state tax return, since social security income is not taxable in Maryland. So, if you paid back social security income, you would not be due a reduction in tax on your Maryland tax return, as the social security income would not have been taxable in the first place.