Drake rep is partially correct, as far as it went, but there is more to it and another choice to consider.
Concerning the repayment of the sick pay: if the taxpayer believed he had the right to the funds when paid and it exceeds $3,000, then in the year of repayment, then he can take the better of these 2 choices:
either take the repayment as a deduction on Sch A line 16 "Other itemized deductions (not the medical section) OR
calculate a credit
The credit is calc'd by going back to the year(s) he received the sick pay and recalculating the tax liability on that return without the portion that was ultimately repaid for that year, using the rates that were in effect at that time. Compare the original tax liability (with the sick pay) to the tax you are now calculating that excludes the portion repaid for that year. The difference between the two amounts is the credit.
This is covered in Pub 525 on page 37. It is in the section about repayments over $3K of income under a claim of right. IRC Sec 1341.