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Wendy Reed
Wendy Reed, Enrolled Agent
Category: Tax
Satisfied Customers: 3346
Experience:  15+ years tax preparation and tax advice.
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I started receiving FERS Disability in July 2006. In Aug. 2009

Customer Question

I started receiving FERS Disability in July 2006. In Aug. 2009 my SSDR was approved back to July 2006. I received backpay of $37000. I notified OPM and 4 months later was told I has to repay the $37000 in one lump sum or make payment of $376.00 for 101 months. I chose to make payments. I had to file amended tax returns for 2006, 2007, 2008 and claim remaining money on 2009 to pay taxes on the backpay. I was told by OPM the money I payback each year is tax exempt and would show on my 1099R. However, that has not happened. Should I still be paying taxes on money that I feel I had paid taxes on twice already? So far my 1099R's have shown the full amount of my retirement income. Thank you
Submitted: 5 years ago.
Category: Tax
Expert:  Wendy Reed replied 5 years ago.
Thank you for giving me the opportunity to assist you. I will give the best answer that I can with the information provided.

Hello there,
I am a little confused as to why you filed amended returns for 2006, 2007, and 2008? If you actually received your FERS disability in those years, but then paid it back in future years, you do not amend the prior year return--you deduct the repayment when you pay it.

If the money that you paid back was not subtracted from the 1099R, then you can claim it as a repayment, and deduct it on schedule A, to the extent that it was taxable on prior returns. The procedure is slightly different depending on whether the amount was greater than or less than $3000. There is also the possibility of taking a credit for the tax depending on the situation

See page 90 in http://www.irs.gov/pub/irs-pdf/p17.pdf

Please let me know if I can assist you further.
Wendy Reed and other Tax Specialists are ready to help you
Customer: replied 5 years ago.
My tax preparer said they had to amend the previous years taxes. Since I didn't understand the reasoning I just let them handle it. I appreciate the answer on filing the repayment on Schedule A since I feel I keep paying taxes on money already taxed. Thank you also for the irs site on page 90.
Expert:  Wendy Reed replied 5 years ago.
I am sorry, I don't agree with your tax preparers actions. Repayment of income is a concept that a good tax preparer should either be familiar with or can easily research to take correct action. Hopefully you can find a new tax person to assist you....You may wish to take your tax returns to a company like that does free reviews of prior tax returns. It will not cost you anything to get them looked at, only if you amend (or re-amend) it may be worth it to straighten out your situation.

Happy New Year to you.