Welcome and thank you for giving me the opportunity to assist you with your tax question.
Repayment of unemployment compensation.If you repaid in 2012 unemployment compensation you received in 2012, subtract the amount you repaid from the total amount you received and enter the difference on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. On the dotted line next to your entry enter “Repaid” and the amount you repaid. If you repaid unemployment compensation in 2012 that you included in income in an earlier year, you can deduct the amount repaid on Schedule A (Form 1040), line 23, if you itemize deductions. If the amount is more than $3,000, see Repayments, earlier.
If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it. Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Generally, you can claim a deduction or credit only if the repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit transaction.
The reference I am citing is Publication 17. http://www.irs.gov/publications/p17/ch12.html#en_US_2012_publink1000172036
I hope this information is helpful to you. Please let me know if I can assist you further. Thank you.
Hello BKB1956,I see ... You have confirmed the fact
Hello BKB1965 -- You have confirmed the statement from the IRS. It seems that if I repaid the amount on 2011, I can deduct 100%. However, I repaid it in 2012, I can only deduct 0-2%. That is quite strange! Is there any other way around this? Thanks.
First expert here - I apologize that I was offline when you posted your follow-up. I want to be sure that you understand that if you choose to utilize Schedule A (if you itemize) you will deduct the TOTAL AMOUNT that is over 2% of your income
you can choose to 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.
It would be up to you to decide which method results in less tax for you.
Thank you and best regards.
Thanks bkb1956, randaltax, and Annne for the clarifications. Now I understand a bit more about the 2% misc. deduction. Still, I am not quite sure of the difference between "restricted" vs. "unrestricted" right method. Thanks.
You are able to
deduct the total amount repaid that is over 2% of your income
take a tax credit for the year of repayment (if you believe you had an unrestricted right to it--which I'm assuming you did at the time).
Please let me know if I can assist you further. Thank you.
I have itemized deductions for 2011 and 2012. Thus, I have Schedule A's for both years. I repaid the amount on 2012. What Line of 1040 or Schedule A is "take a tax credit for the year"?
Thanks! All of you are extremely helpful!
If I may allocate the fee, 50% Kbk1956 and 50% RandallTax.
Thanks BKB1956! What is your real name, BTW?
Once again, thank you!
Dear Barb. & Randall,
In the entering the amount of credit in Line 71 of Year 2012/Form 1040,
do I enter the total amount of overpayment amount + EDD other charges, penalties, & costs OR enter overpayment amount ONLY?
If you're utilizing Line 71, you're using the credit amount and would include the amount attributable to the unemployment you received in 2011 which you repaid in 2012.
If I use 2012 SA, which line(s) should I enter the amount of over-repayment and which line(s) should I enter the amount of penalties, charges, and other costs?
Thanks for your wonderful help, Barb.
It's been my pleasure. If you have any questions in the future, please put "for bkb1956" in the subject line, and I will be happy to assist you.