How to report Unemployment Repayment Question

[Pinkyl321]

I received unemployment compensation for 2023 and 2024. In March 2024, I was informed that I was overpayed benefits and had to repay them. 
How would the repayment be reported on 2024 federal or state tax return (New Jersey)?

[MaryK4]

You will want to report the repayments in the year you repaid.  In TurboTax, when you enter the 1099-G, you can indicate the repayment. (Look for the screens below.)  This will reduce the amount of taxable income for you.  The income from the federal tax return will be used for New Jersey so no additional information is needed in the state section of TurboTax.

[rjs]

Unemployment benefits are not taxable in New Jersey, so there is no adjustment on the New Jersey tax return for the repayment. Neither the benefits you received nor the repayment will appear on your New Jersey tax return.

[Pinkyl321]

Hi, thank you for your response! I see the boxes that you are referring to on TurboTax, but I just want to make sure I understand how exactly it gets reported before filing. Would the repayment go on Schedule 1 as a subtraction from the 2024 benefits received? (The repayment was for benefits received in 2023, but I was not informed they were overpayed until 2024) Or is there a different form or line on Schedule 1 that this would be imputed?

[Pinkyl321]

Hi, thanks for the response! I had forgotten this was the case in New Jersey so thank you for the reminder! What about for the federal tax return? Another commenter has shown how to input into Turbo Tax, but I just want to make sure I understand what form/line this information would go on before actually filing. 

[rjs]

@Pinkyl321 

You have now clarified that "The repayment [in 2024] was for benefits received in 2023." The instructions that MaryK4 gave you above are for repayment in the same year that the benefits were received. Repayment of benefits that you received in an earlier year has to be handled in a completely different, and more complicated, way.

You have not said the amount that you had to repay. If you repaid $3,000 or less of benefits that you received in an earlier year there is no tax adjustment. You don't report the repayment on your tax return. You don't enter the repayment in TurboTax at all.

If you repaid more than $3,000 of benefits that you received in an earlier year you have a choice of two ways to report the repayment on your 2024 tax return. You can claim either an itemized deduction for the amount you repaid, or a credit that is determined by a recalculation of your 2023 tax return. You can choose whichever makes your 2024 tax lower. If you repaid more than $3,000 post back and I will give you the details of the two options.

Please note that, when more than one person has posted, and you reply to someone else's post, there is no indication of who you are replying to unless you state it in your reply.

[Pinkyl321]

@rjs Sorry, did not realize that about the replies! 
The amount that needed to be repaid was less than $3,000. So because of that and the fact that it was paid in 2024 means I cannot do anything with the amount? How was I supposed to repay in the year the benefits were received if I was not notified that a repayment was needed until 2024?

 And I do see that there is a box on TurboTax  that’s says about inputting amounts repaid in 2024 for benefits in 2023 or earlier. If I put the amount in there, will it not have any impact because it’s less than $3000?

[rjs]

@Pinkyl321 

It's not that you were supposed to repay in the same year. Repayment in a later year is very common. But under the tax reform law that was passed in 2017 many deductions were eliminated for 2018 through 2025. One of those was the deduction for repayment of income reported in an earlier year if the amount is $3,000 or less.

If you enter the repayment in the box that you saw, TurboTax will just ignore it because there is no deduction or credit for a repayment of $3,000 or less. Entering it will have no effect on your tax.

(TurboTax doesn't actually completely ignore an entry of $3,000 or less. It will transfer the entry to the state tax return if you are in a state that allows the deduction. But since you are in New Jersey there is no place for it on the state tax return, so it is effectively ignored.)

[Pinkyl321]

@rjs Okay, I understand. Thank you so much for your assistance and explanations! 

[cmacdub86]

@rjs 

I have the same situation described here where I've made repayments in 2024 for a previous year, but my repayment has been for more than $3000 (shown in box 2 of my 1099-G as an "Adjustment"). Would you mind describing how one might go about reporting this? When I follow the prompts via the 1099-G, it seems to be placing that repayment amount in "box 7" and attributing it to some sort of agricultural payment. Thanks in advance!

[MonikaK1]

You can either tax a credit or a deduction for this on your Federal return. See this TurboTax help article for instructions for the Federal return.

A Claim of Right Repayment is a deduction you can take in the current tax year if you’re required to pay back income in excess of $3,000 from a previous tax year that you thought you could keep. You reported and paid taxes on the money, not knowing you’d have to pay it back. Examples of this type of income include: the repayment of signing bonuses, moving expenses, unemployment compensation, and other funds.

@cmacdub86 

[cmacdub86]

@MonikaK1 

Great, thanks so much for the help!