Repayments

[Bonnie]

I've come across way too many new things this year. Taxpayer gets out of Army and receives a severance package of about 40,000. Then files for VA disability and it's granted but they then want the severance pay back. So begin taking the disability payments until it's all repaid. Approximately 10,000 paid back in 2015. Reading in Tax Book 3-17, it says to reduce taxable income by amount repaid in current year and report the difference. So I enter amount in box 1 of the W-2 not amount on W2 but the difference. Won't IRS question why there is a lesser amount in box 1? Never had to deal with this but can't wrap my mind around how I can enter an amount different than what is in box 1 of W2

[taxea]

I would take the payback on ln 21. Was any withholding/SS/or Medicare taken from the original distribution? You may need to make an adjustment to recoop for the SS and medicare taken. You would take it based on the amount of payback each year.

[Bonnie]

Paperwork he gave me says that he must pay back the amount of severance pay minus federal withholdings. Of course he gets credit for that on tax return. But nothing is mentioned about SS and medicare. Would I recoop those by filing an 843

[taxea]

I remember which client I did this for. I will review his return and let you know.

[taxea]

I remember which client I did this for. I will review his return and let you know.

The amount goes on line 23 Sch A. I remember researching this to see how to deduct it. If I find the site I will post it.

[Burke]

Paperwork he gave me says that he must pay back the amount of severance pay minus federal withholdings. Of course he gets credit for that on tax return. But nothing is mentioned about SS and medicare. Would I recoop those by filing an 843

Yes, you file Form 843. See instructions for Line 7.