Unemployment Compensation

[Bird Legs]

Am working on the 2004 income tax return for client.
Facts: Client received $3400. in unemployment benefits in 2003. This was reported
as income on the 2003 tax return.
Problem: Question? In early 2004 client received a letter from the State Unemployment Commission that client was not entitled to the unemp; compensation and that she
needed to start paying it back. The commission let her pay it back in monthly payments.
How do I treat this payback? Amend the 2003 tax return omitting the unempl. comp.
or somehow deducting it on the 2004 return?
Have not had this before.
Thanks.

[Gretel]

Bird Legs, look in the TB pg. 3-19. No amended return. Since pay back is in a later year and the total payments are over $3,000 it either goes on Sch.A or you can claim a credit after figuring the difference between what T/P would have paid in taxes if he had not received unemployment as opposed to what he actually paid.

[Bird Legs]

Gabriele

You are great. Thanks. Hope it is not too hot where you are.
It is hot, humid and no rain here. Almost a drought.

[Gretel]

Glad I could help. It's very hot and dry up here, not humid though, which makes all the difference. We have a drought since 9 years, last two years a little better, but this year is the worst. I am aching for rain. Never thought this would be possible growing up in a place were most of the year is rainy or at least overcast.