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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28086
Experience:  Taxes, Immigration, Labor Relations
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I have to payback a draw against commission. I paid taxes on

Customer Question

I have to payback a draw against commission. I paid taxes on the draw as income in 2014. Not sure how to treat for 2015
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
Hi and welcome to our site!
The issue is that you received payment from the civil service annuity in 2014 - but paid back in 2015.
So these transactions are reported for different tax periods.
.
When payment is included into taxable income - then when later you PAY that amount back - that classified as REPAYMENT.
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.
You will find information about HOW to claim a deduction or a credit for the repayment in IRS publication 525 -
www.irs.gov/pub/irs-pdf/p525.pdf
see page 34 fro details and examples.
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So - on your 2014 tax return - you will report the full amount paid to you and all taxes withheld will be credited toward your total tax liability.
On your 2015 tax return you will report either deduction or credit or the repayment of a previously taxable income.
So - effectively - that will eliminate double taxation of the same income.
Let me know if you need any help with reporting.