Repayment Under Claim of Right IRC 1341

[Jim-from-Ohio]

Looking at deduction on Schdeule A for this repayment client made to employer.  Is there a certain line on Schedule A that it goes on? Looking at program thinking line 31. anyone concur?

[PATAX]

Jim there is a whole section on this on page 3-26 of the federal tax book deluxe edition. It looks like it depends on whether the amount is $3,000 or less or greater than 3,000. Looks like if it is $3,000 or less and the income was previously reported as wages then no deduction is allowed. If more than $3,000 it states to claim a deduction on line 16 of schedule A or to claim a credit that apparently goes to line 13B schedule 3. I cannot recall having this before so you should read the whole section to make sure.

[Jim-from-Ohio]

Thanks Dan.. this is a new one to me. I did some research on it and I see that it may qualify as a deduction or a credit.. in some cases credit is better, in some cases deduction is better. Hope things are well in PA.. 

[PATAX]

You're welcome. I'm working on a return now too.

[TaxGuyBill]

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@Jim-from-Ohio wrote:

 Is there a certain line on Schedule A that it goes on? Looking at program thinking line 31.

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I'm wondering why your Schedule A has significantly more lines than my Schedule A.  🤣

Line 16.

https://www.irs.gov/publications/p525#en_US_2023_publink1000229603

https://www.irs.gov/instructions/i1040sca#en_US_2023_publink100073879

[Jim-from-Ohio]

I was looking at Misc. Itemized Deductions Worksheet. not the actual Schedule A.

[PATAX]

@TaxGuyBill ask a hundred accountants how many lines are on Schedule A, and 10 will say they know. Out of that 10, five will be lying. That form is not as common as it used to be, since the standard deduction was basically doubled when we were supposed to get the so-called postcard form, but what we got was more schedules and paper.

[TaxGuyBill]

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@PATAX wrote:

ask a hundred accountants how many lines are on Schedule A,

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I had no idea; I had to look it up.  😁

[BobKamman]

I wasn't sure that deduction had not been placed on hiatus by TCJA, so I did a word search for "claim of right" on the Schedule A instructions and found it's still there, along with a reference to Pub 525.  Not that some IRS pubs don't have lengthy explanations of some itemized deductions with short warnings that they are not currently available. 

I grouped this blue-moon situation with the more familiar foreign tax credit, where it's always better to take the credit rather than the deduction.  Except when it isn't, and I don't want to clutter my mind with those details.  But I think with Section 1341, it mostly involves a comparison of the highest tax bracket in the year of receipt, and the highest tax bracket in the year of repayment.  Also, it's a no-brainer if the taxpayer is not itemizing.  

[Just-Lisa-Now-]

You sure the credit isnt more bang for your buck than the Sch A deduction?