Certificate For Income Tax Adjustment

[KMACK]

One of my clients received a Certificate For Income Tax Adjustment from his employer, the US Department of Defense.  It states he was overpaid in a prior year and that the amount of overpayment was repaid in 2019 and is deductible as a miscellaneous itemized deduction.

However, as of 2018 miscellaneous itemized deductions are no longer allowed (for federal tax purposes).  So doesn't that mean it really is not deductible?  Am I missing something?  How do I record this in ProSeries?

[TAXOH · Accepted solution]

This is from the instruction for Schedule A

Other Itemized Deductions
List the type and amount of each expense from the following list next to line 16 and enter the total of these expenses on line 16. If you are filing a paper return and you can't fit all your expenses on the dotted lines next to line 16, attach a statement instead showing the type and amount of each expense.

Only the expenses listed next can be deducted on line 16. For more information about each of these expenses, see Pub. 529.

Gambling losses (gambling losses include, but aren't limited to, the cost of non-winning bingo, lottery, and raffle tickets), but only to the extent of gambling winnings reported on Schedule 1 (Form 1040 or 1040-SR), line 8.
Casualty and theft losses of income-producing property from Form 4684, lines 32 and 38b, or Form 4797, line 18a.
Federal estate tax on income in respect of a decedent.
A deduction for amortizable bond premium (for example, a deduction allowed for a bond premium carryforward or a deduction for amortizable bond premium on bonds acquired before October 23, 1986).
An ordinary loss attributable to a contingent payment debt instrument or an inflation-indexed debt instrument (for example, a Treasury Inflation-Protected Security).
Deduction for repayment of amounts under a claim of right if over $3,000. See Pub. 525 for details.
Certain unrecovered investment in a pension.
Impairment-related work expenses of a disabled person.

[Just-Lisa-Now-]

I'd research Section 1341 - Claim of right

What Is the Section 1341 Credit?

The Section 1341 Credit is a federal tax credit available for U.S. taxpayers who reported income in a previous year but had to repay the income because it was paid in error in the first place.

[itonewbie]

If the repayment is more than $3,000, your client can take a credit for claim of right.  Take a look at §1341.

[itonewbie]

What exactly is the nature of this repayment?

[KMACK]

Ok.  I will check.  Unfortunately his amount is less than $3,000.

[KMACK]

I think it relates to moving expenses paid by his employer in a previous year.

[KMACK]

Thank you.  Publication 525 had the answer.

[KMACK]

Thank you for your help.  I found the answer in IRS Publication 525.  It is not deductible any more if the amount is under $3,000.

[TAXOH]

You're welcome.