How to deduct overpayment of STD from a previous year repaid in 2021.

[Danielbdn]

I received a letter from std insurance company stating that In 2021 I repaid $12,090.60 for an overpayment received in 2019 & 20.  Shouldn't this reduce my taxable income for 2021 by the $12,090.60?  When I enter it in line 16 of Schedule A it doesn't change my return because it isn't enough to put me over the standard deduction, but when I claimed it as income in 2019 & 20 it raised my taxable income by the amount paid in each year? 

[HelenC12]

Use TurboTax CD/Download to calculate the amount of tax you overpaid and take a refundable credit. This is the more valuable option, versus the itemized deduction, though it requires a bit more work.

Please see the TurboTax FAQ and scroll down to Taking the credit in TurboTax CD\Download.

[Danielbdn]

Thank you.

[Danielbdn]

Could you help me understand what I enter on line ?  It says "Enter the adjusted amount of tax paid on Line H, Other payments or credits" what does this mean, the next line is the entering the credit amount that i calculated which is the amount of tax over payment paid in the previous years. I am unclear what it means by adjusted amount of tax paid for line H, is this the amount of the original tax liability or what should have been the tax liability if I had not been overpaid?

[AmyC]

Step by step guidance, see What is a Claim of Right Repayment. 

See also example on page 36 of Pub 525. You will want to determine which is better for you, the credit or the deduction. If the credit is best, you will need to download the desktop version and move your .data file so you can pick right up where you left off.  

You may need to file Form 843 for Medicare and Social Security taxes to be refunded, also on page 36, third column.

See also: 

How to download TurboTax Desktop software from TurboTax.com

My deduction answer with pictures and guide.

My instructions for how to determine the credit.

[Danielbdn]

I have done all the work by using my download version for 2019 & 20. I just am confused by what it wants me to put on line H (step 5 of applying the credit) it says to put the calculated difference in tax paid vs what should have been paid if no overpayment was made on line E.  I just need to know what it means by adjusted amount of tax paid for line H.  

Thank you

[Danielbdn]

Sorry for the confusing wording of my last post.  I know that step 6 is to put the calculated credit of overpaid taxes from previous years on line E.  I am unclear by step 5, as to what it wants me to put on line H where it says adjusted amount of tax paid.  What does it mean by adjusted amount of tax paid?

[AmyC]

Sorry! The steps are not as complicated as the article. Scroll down to sch 3, line 13d worksheet and enter your amount repaid. The program moves it to sch 3 and the 1040, line 31. Done

worksheet entry

sch 3 line 13

1040

[Danielbdn]

Thank you.  Just so I am clear using this method I enter the total amount of overpayment which was $12,090.60 for 2019&20 or do I just enter the tax difference that I got by changing the taxable income for each of those years using the turbotax software for each year, which resulted in $1,728?

[massachusetts1]

Agreed, and if you are still here at this late date.      It does remain unclear what we're talking about for each entry.

(I'm submitting a 2021 1040 Extension Return by this weekend. October)

All I know is that I must have overpaid in 2019, and I wouldn't know anything about it. I just worked with the amounts and made entries at the time of the Return in 2019 using the 1099's, 1098's, incomes and expenses from business, and so forth - just as I do every year.

In 2021 I received a check out of nowhere for an amount I apparently overpaid in 2019.  There was a letter showing the figures for "your tax calculations" and then for "your pymts. and credits".    It would seem that I overpaid in tax estimates and for "other payments".  But I wouldn't have known that at time of the 2019 Return.

Do I use the 2 "Forms" or 2 processes mentioned above?

And, are the 2 Forms (entries) to offset each other in 2019 and 2021?

Thanks so much.

[massachusetts1]

One more --  If the 2 Forms are the correct process, does one need to re-submit the "corrected" 2019 Tax Return?

(My 2021 Return goes in this week.)