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spowens
New Member

I repaid wages to my employer in 2017 in the amount of $62,500. This was income I claimed in 2017, 2016 and 2015 and paid taxes on. How can I show this as a deduction?

 
10 Replies
DoninGA
Level 15

I repaid wages to my employer in 2017 in the amount of $62,500. This was income I claimed in 2017, 2016 and 2015 and paid taxes on. How can I show this as a deduction?

Since you repaid the taxable amounts in 2017, the amounts repaid are entered as an itemized deduction on Schedule A or as a tax credit on Form 1040 Line 73d 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 -

  • Click on Federal Taxes (Personal using Home and Business)
  • Click on Deductions and Credits
  • Click on I'll choose what I work on
  • Scroll down to Other Deductions and Credits
  • On Other Deductible Expenses, click on the start or update button

Or enter other deductions in the Search box located in the upper right of the program screen.  Click on Jump to other deductions

On the next screen, click on No (Generation Skipping Taxes)

(If the repayment was $3,000 or less) On the next screen, click on Yes (Less Common Expenses) and enter a description and the amount repaid on the following screen.  Continue with this section until it completes.

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(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.

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If your repayment is greater then $3,000, instead of entering the amount repaid as an itemized deduction on Schedule A, you can enter a Claim of Right tax credit on Form 1040 Line 73d,  You will need to determine which method of reporting the repayment gives you the greater benefit.

This tax credit can only be entered directly on Form 1040, so you have to use the 2017 desktop editions as the online editions do not have the capability to enter tax data directly on a form, schedule or worksheet.  Using the desktop editions in Forms mode to access Form 1040 Line 73d and enter the tax credit in the Other Credits and Payments Smart Worksheet line D.

To figure the Claim of Right tax credit, use Method 2 in IRS Publication 525 Taxable and Nontaxable Income. page 34 - https://www.irs.gov/pub/irs-pdf/p525.pdf#page=34

DoninGA
Level 15

I repaid wages to my employer in 2017 in the amount of $62,500. This was income I claimed in 2017, 2016 and 2015 and paid taxes on. How can I show this as a deduction?

Assuming that you meant to indicate "income I claimed in 2016, 2015 and 2014 and paid taxes on".
spowens
New Member

I repaid wages to my employer in 2017 in the amount of $62,500. This was income I claimed in 2017, 2016 and 2015 and paid taxes on. How can I show this as a deduction?

So what is it that I’m deducting on Schedule A? The actual amount of wages repaid or the taxes paid on these wages?
Opus 17
Level 15

I repaid wages to my employer in 2017 in the amount of $62,500. This was income I claimed in 2017, 2016 and 2015 and paid taxes on. How can I show this as a deduction?

If you received income in 2017 and that was part of the repayment, your employer should adjust your W-2 to show only your net pay for the year after subtractions.  Amounts paid in prior years have to be deducted on the tax return and the employer can't adjust your 2017 W-2 to take care of 2016 and 2015 payments.
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
DoninGA
Level 15

I repaid wages to my employer in 2017 in the amount of $62,500. This was income I claimed in 2017, 2016 and 2015 and paid taxes on. How can I show this as a deduction?

You are deducting the wages repaid
spowens
New Member

I repaid wages to my employer in 2017 in the amount of $62,500. This was income I claimed in 2017, 2016 and 2015 and paid taxes on. How can I show this as a deduction?

Does this still work if I am in a higher tax bracket in 2017 that I was when the wages were original claimed and tax paid?
spowens
New Member

I repaid wages to my employer in 2017 in the amount of $62,500. This was income I claimed in 2017, 2016 and 2015 and paid taxes on. How can I show this as a deduction?

Does this still work if I am in a higher tax bracket in 2017 that I was when the wages were original claimed and tax paid?
DoninGA
Level 15

I repaid wages to my employer in 2017 in the amount of $62,500. This was income I claimed in 2017, 2016 and 2015 and paid taxes on. How can I show this as a deduction?

Entering the repaid wages as a deduction does not take into account one way or another your tax bracket when the wages were originally reported as income on the prior year tax returns.
spowens
New Member

I repaid wages to my employer in 2017 in the amount of $62,500. This was income I claimed in 2017, 2016 and 2015 and paid taxes on. How can I show this as a deduction?

Thank you
Opus 17
Level 15

I repaid wages to my employer in 2017 in the amount of $62,500. This was income I claimed in 2017, 2016 and 2015 and paid taxes on. How can I show this as a deduction?

Because you have the choice of taking a tax deduction or a direct credit, you can kind of game the system, because you can do whichever gives you the biggest benefit.  You can either deduct the wages repaid on schedule A, or you can take a direct credit equal to the amount of tax that you paid in past years that was due to the higher wages that are now repaid (you have to compute this manually).  If you are now in a higher bracket, then potentially the deduction will save you more now, than the excess tax you paid before.  That's perfectly fine.
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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