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In 2014 I collected 1 week short term disability. After

Customer Question
In 2014 I collected...

In 2014 I collected 1 week short term disability. After check was cashed the company said it paid me $330. too much. I did not pay it back. 3 years later filed another short term disability and the $330. was deducted. Is that legal? I would have paid tax on that income. It could have been reported as loss on their taxes.

Accountant's Assistant: Because laws vary from place to place, can you tell me what state this is in?

Wisconsin

Accountant's Assistant: Is the employment agreement "at will," union, full time or part time?

Full time. I have union job.

Accountant's Assistant: Anything else you want the lawyer to know before I connect you?

Not that I can think of.

Submitted: 2 months ago.Category: Tax
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Answered in 1 minute by:
12/18/2017
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,507
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi My name's Lane ...

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice to clients on three continents since 1986.

If you’ll please bear with me for a minute I’ll type up my initial response, and then we can go from there if you have further questions on this.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago

If they didn't give you a 1099-C and treat it as forgiven debt. I'm so sorry, but they wouldn't have deducted ... and if they did take the bad debts deduction without sending the 1099-C THEY have a problem.

...

If you paid tax on this, what you CAN do is use IRC section 1341 "claim of right" doctrine to take the deduction yourself in the year it was "re-paid."

...

This is used more often with people who work in a commission draw or some other employment contract where is turns out that they have to re-pay something on which they paid tax earlier.

...

But yes, if in the contract (the underlying disability policy) that amount shouldn't have been paid, then they DO have the legal right to do what they've done.

...

If you'll bear with me, I'll get the process for you.

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Customer reply replied 2 months ago
I can not get reply over my ancient cell phone
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago

Oh, I'm so sorry, I had forgotten about the 3000 threshold.

...

See this:

...

A Claim of Right occurs when a taxpayer reported income as being taxable in one year, but then has to repay more than $3000 of that income back in a future tax year. If the amount repaid was more than $3,000, it is either deducted as a miscellaneous deduction on Line 28,Schedule A, Form 1040 (and is not subject to the 2% of adjusted gross income limitation) or it is used to determine a credit that can be entered on Line 73, Form 1040, whichever method results in less tax.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago

Here's the law on this (see section (a)(3). So sorry to be the messenger.

...

But (again, so sorry) their being able to do this depends on the underlying contract (policy)

...

https://www.law.cornell.edu/uscode/text/26/1341

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago

Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating, using the stars on your screen, and then clicking “submit" (you may have to scroll up to see them OR look to one side or the other if you’re on a device, such as a phone or tablet – That’s the only way I’ll be credited for the work.

I hope you’ll rate me based on my accuracy and thoroughness (as opposed to any good news/bad news content). Thank you!

..

But again, if you need more on this, please let me know.

Lane

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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,507
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Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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