Client was sent 2019 w-2 for companys insurance sick pay.

[Swampland]

Client was sent 2019 w-2 for company insurance sick pay. Taxes were withheld. Social Security approved disability with backpay covering the wages paid by company.  On Dec 27,2019 company sent letter wanting client to pay the wages money back and the client paid the wages back in 2020. How do I handle  on tax return? Client should not be taxed on the 2019 w-2 info.

[George4Tacks · Accepted solution]

File 2019 with all the income that was reported - W-2 and Social Security. Client should be taxed on the W-2, since it was received in 2019. They can "get even" in 2020. If the client had run down to the office on 12/27/2019 and paid it back, THEN they would not be getting a W-2. I suspect they did not know that. 

File 2020 file for a credit or deduction under the Claim of Right. Look at REPAYMENT in Pub 525  https://www.irs.gov/pub/irs-pdf/p525.pdf