How does this answer change if the payback happened in the SAME year the income was received (payback exceeds $5K)?
What if the disability payments were received in 2019 and repaid in early 2020 prior to tax filing?
Must the taxpayer pay the taxes for 2019 and then claim a repayment on the 2020 return?
Is there a method in which the taxpayer can deduct the 2019 payments on the 2019 return given that they were repaid in early 2020 before filing the 2019 return?
Thank you.
Yes, you must claim and pay the tax for the amount you received in 2019 and the deduct the repayment made in 2020.
DianeC958 - Thank you very much for your response. Was hoping there was another way to handle this, but your answer is very much appreciated.
Pre 2019 ammount-541.41$ potential2019 tax deduction 541.41$ pre-2019 amt.× taxability of claim 100%
Repayments are discussed in IRS publication 525 pages 34 & 35.
You talk about amounts of repayments of less than $3,000. Note this statement in the right hand column of page 34.
"For tax years beginning after 2017, you can no longer claim any miscellaneous itemized deductions, so if the amount repaid was $3,000 or less, you are not able to deduct it from your income in the year you repaid it."
I know this is an old thread but hoping someone can clarify the response from @JamesG1 . He writes:
"so if the amount repaid was $3,000 or less..."
What if the repayment is significantly greater than $3,000? I received disability payments in 2020, covering years 2019 and 2020. Then later had to repay some of that in 2020, and now being asked to repay even more of that 2019/2020 money, in March 2021. Thank you.
If the amount you repaid was more than $3,000, you can deduct the repayment as an other itemized deduction on Schedule A (Form 1040), line 16, if you included the income under a claim of right. This means that at the time you included the income, it appeared that you had an unrestricted right to it. However, you can choose to take a credit for the year of repayment.
Taxable and Non-Taxable Income see page 34
Since you repaid the taxable amounts in 2020, the amounts repaid are entered as an itemized deduction on Schedule A or as a tax credit on Form 1040 as a Claim of Right IRC 1341, depending on the amount repaid.
To report the repayment of taxable income as an itemized deduction on Schedule A -
(If the repayment was greater then $3,000) On the next screen, click on No (Less Common Expenses)
On the next screen, click on Yes (Any Other Deductions)
On the next screen, enter the amount repaid in the box for Claim of Right repayment. Continue with this section until it completes.
All I received was a letter from ltd stating I had repaid the overpayment. Shouldn't I get an actual tax statement?
But what if the amount repaid was to Metlife insurance vs SSD. are they treated the same?
Yes, they would be treated the same. If the repayment was greater than $3,000 you have the ability to take a deduction from your income.
I also had to pay back my long term disability company in January 2021 for funds received in 2020 after my social security disability was approved. My SSA 1099 shows the amount for 2020 and 2021 and entered both amounts on this year 1040.
the amount paid back was over $3000. Does the refunded amount get entered on the first page of the less common deduction section with the description and amount. Or on the next page under claim of right repayment over $3000? I was told the first page. then read instructions in pub 525 and seems it should go under the claim of right repayment. Thank you.
Claim of right repayment over $3,000 may be reported as a deduction by following these steps.
The deduction is reported on line 16 of Schedule A Itemized Deductions.
Computation of the credit option is outlined here by KristinaK.
yes per my message i knew that. My question was i was told to put it on the first page of Other Decutible Expenses with an explanation. Then the second page takes you to Claim of Right over $3000. Which place does it go?
I receive overpayment notice for gross amount paid over Dec 2021-Feb 2022 of appx $6000. I only received $5600 net. (Gross minus SS and Medicare). What’s the reason I need to pay entire amount? Will I get some kind of credit with SS and Medicare?
Gross income reported in box 1 of a W-2 (if this income were paid on a W-2) would have been $6,000. After Social Security and Medicare payments reported in boxes 4 and 6 of a W-2, you would have netted the $5,600. It sound like the $6,000 is gross income and subject to repayment.
From whom did you receive the overpayment notice? If the disability notice was received from the Social Security Administration, the discrepancy that you mentioned may ultimately be adjusted. If the disability notice was received from an insurance company or private company, it may not be adjusted without you taking other actions.
Also, does the notice state that you are to pay back the $6,000 or that the $6,000 has been paid back in 2022? At this point, the facts are not clear.
If you received taxable income in 2021 and paid all or a portion back in 2022, you may qualify for a claim of right repayment on your 2022 Federal 1040 tax return.
A claim of right repayment occurs when a taxpayer is required to repay income that they had reported and paid tax on in a previous tax year. The repayment must be of funds that, when received, the taxpayer had a reasonable belief he or she had unrestricted access to.
See also this information.
@Khaselden2
This is from an insurance company for STD benefits.
I was paid $1800 in Dec 2021. Of which I received a W-2, filed and paid taxes.
Continued to receive benefits until middle of February 2022(a gross amount - Medicare and SS tax).
Received notice March 2022 that I was overpaid the entire amount.(another story) to gross amount of $6000…instead of net amount of $5600(what I received)
From your response, I will receive some sort of credit of $6000 via a form to file in 2022. So anything paid as taxes for 2021, I will get to lower my AGI for 2022, in effect “getting my 2021 taxes paid back”
I have not paid the $6000 because I was questioning amount.
Have you received proceeds from the Social Security Administration that will allow you to repay the insurance company?
Do you have legal representation that can review your individual situation and provide you guidance?
If the re-payment is made in 2022, you may have a claim of right repayment for the $1,800 reported as income in 2021.
If the insurance company is repaid for the amount received in 2022, the insurance company should not generate a W-2 in January of 2022.
I repaid disability benefits that were overpaid to me because of a coding error back to 2017, 2018, 2019 & 2020. The company issued amended T4A's for the amounts I should of received but now I owe a lot of money due to no fault of my own. The company is insisting that a credit will be issued for the 2022 tax year for the repayment amounts. Should I not be able to use those credits now in an adjustment in order to not to owe this huge bill to CRA?
If I cannot use the credits for prior years, should the company not of sent out the amended T4A's until the 2022 tax year as well?
Thank you for your help.
I received lump sum SSDI in 2022 and had to pay it all back to third party payor for prior years .
do I still have to claim it as income even though
I gave it away!
Yes, you must include the taxable part of a lump-sum payment of benefits for the tax year the benefit is received. There are two methods to determine the amount of income that is taxable:
For more information, see the link below:
Social Security Disability Income Back Pay