Received 1099-NEC Previous Year then returned

[Joel Willott]

I received a 1099-NEC in 2023 of $12,500 and I payed and reported that on my tax return for that year. In 2024 I returned that money ($12,500) to the same company. I just want to make sure that I have the loss of income in the correct section for the federal section. In the Deductions & Credits tab under the other deductions and credits section under the other deductible expenses section is this where it should be? Also would this loss of income affect my state taxes? I am a washington resident but work for a Minnesota company (pilot), when it asks me how much I made in minnesota would I deduct that $12,500 amount from the amount on my W2?

Thanks

[AmyC]

No, it isn't deducted from your w2. The IRC 1341 can be complicated. You paid back more than $3,000 so you qualify for claim of right repayment. There are a couple ways to handle it. See What is a claim of right repayment?