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Unemployment Benefits Repayment


Chowdahead
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Client repaid $8,000 in unemployment benefits in 2014.  He says an official from unemployment told him he has to report it on his income tax return, but that he would not be issued a 1099-G because he didn't collect benefits in 2014.

 

I know that on the 1099-G there is a box for repaid benefits.  However, ATX won't e-file the 1099-G unless there is at least $1 in benefits received.

 

Anyone know if this money needs to be reported?  I don't see any tax benefit or liability for him in doing it.

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Seems to me it should be a write in adjustment on line 36 as repayment of previously taxed income.

 

I stand corrected: According to page 3-18 of The Tax Book:  Repayments over $ 3,000:

 

1.  Claim as a miscellaneous itemized deduction subject to 2 %  ( not a good result )

 

2.  Claim a credit for the the repaid amount on line 73 Form 1040, calculated as follows:

 

       Refigure tax from the earlier year without the income that was later repaid. Subtract the refigured tax

       from the tax shown on the original return. Enter the result on line 73 Form 1040

       Enter "IRC 1341 next to line 73.

 

I had no idea this procedure existed until I looked this up !

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That is what I did when I got the error message.  The 1099G had $0 in box 1 and a repayment amount.  I could not get past the error so I put it on line 36 with an explanation.

 

Tom

Newark, CA

 

You might want to read this:

 

http://www.irs.gov/publications/p17/ch12.html#en_US_2014_publink1000172015

 

>If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040).

 

>Repayment over $3,000.   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained under Type of deduction , earlier). However, you can choose instead to take a tax credit for the year of repayment 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. If you qualify for this choice, figure your tax under both methods and compare the results. Use the method (deduction or credit) that results in less tax.

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Had one of these a few years ago wherein a gal had to repay >$10,000.  She repaid it all in one year.  It just happened that was the year they spoke about this subject at tax classes.  I remember how excited I was because I really didn't know how to handle that situation at the time.  She had already paid tax on that income so it only stood to reason that when she paid it back she should get a credit.
 

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The one year I had to deal with this, it was a payment and REpayment all in the same year.  

 

The feds had no trouble with it.

 

The state dept of revenue, the self-same idiots who ISSUED the 1099-G stating clearly what they wanted done in terms of reporting income and repayment, caused us endless uncomprehending grief for about four months.  What a pack of losers...

Edited by Catherine
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