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Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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n Feb of this year I received a favorable decision for SS disability

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n Feb of this year I received a favorable decision for SS disability It was determined that my disability started 9/6/2006, so I was paid retroactively back to Feb of 2007.
My problem is the following...
During my wait for SS disability (two years) I was paid LTD through The Hartford. For these years my 1099 showed the amount I received and I paid full taxes on this amount. Now I have a retroactive payment from SS all of which I now owe back to The Hartford. And, indeed by full admission of SS I was disabled at that time and should have been collecting SS disability, which I would have been taxed much less on. Now that I am sending this full amount back to The Hartford, I feel that I should request a revised 1099 for both of those years and adjust my taxes accordingly. But, I am told the the government does not see it this way and in fact I will owe a huge tax debt this year because SS will send me a 1099 showing all the backpay and The Hartford will send me a 1099 showing the full amo

Anytime that you make repayments of income, you are allowed to take a credit on your tax return for the difference in what the tax would have been if you had never received those payments. You may also list the repayments as an itemized deduction on Schedule A, however, using the first method I mentioned of claiming the tax credit will be more to your advantage.

You will claim this credit when you file your 2009 tax return. What you will do is go back and re-calculate your taxes for 2007 and 2008 and determine what your tax would have been without the LTD amounts which you now have to repay. The difference in that amount and what you actually paid in tax will then be taken as a direct credit against any tax you owe in 2009.

Refer to the following publication under the section entitled "Repayments".

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