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February 21, 2021
Question

Where in turbotax can in input amounts for form 1040's schedule 3? Specifically I need to enter an amount on Schedule 3 line 12d.

  • February 21, 2021
  • 1 reply
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This is using the method 2 of IRS 525 publication for a claim of right repayment. Basically repaying a relocation benefit from a previous year because my tax rate was greater last year vs this year so this route yields a better tax reduction than method 1 taking it as a deduction in this year.

1 reply

February 25, 2021

It sounds like you are interested in the sections Figuring the Credit and Applying the Credit.

 

A claim of right repayment occurs when a taxpayer is required to repay income that they had reported and paid tax on in a previous tax year in an amount greater than $3,000.  The repayment must be of funds that, when received, the taxpayer had a reasonable belief he or she had unrestricted access to.

 

What year or years did you pay the income?  That year (or years), you are eligible for a repayment that would create a Claim of Right issue.  See IRS Publication 17 and enter Control F and search for ‘claim of right’.  The repayment credit or deduction would be reported on the current year's tax return.  Follow these steps: 

  • Down the left side of the screen, click on Federal.
  • Across the top of the screen, click on Deductions & Credits.
  • Scroll to the bottom of the screen for Other Deductions & Credits.
  • Click on Other Deductible Expenses.
  • Continue until you see the screen that states Repayments of $3,000 or less or Repayments of $3,000 or more depending upon your situation.

For repayments of $3,000 or more, you also have the option of reporting a credit but you have to re-compute your taxes for the tax year that you paid the income.  See this TurboTax Help.

 

Figuring the Credit

 

Open your tax return in the year that the income was received, using TurboTax software installed on your computer. You may need to install the software and transfer your online data to the desktop program first. For assistance with this, see: How to switch from online TurboTax to the TurboTax software? and TurboTax Prior Year Products.

 

Save a second copy (using the Save As command, or Copy for Mac) of the return to preserve the original. Make a note of the Total Tax paid on the tax return by looking for the line Total Tax on the Form 1040 (or in some years 1040A, 1040EZ, or 1040SR).

 

Remove the income that was repaid by adjusting the appropriate income item. For example, if wages were repaid, reduce the Box 1 entry of the W-2.

 

Click on the Forms icon in the upper right corner of the TurboTax program and then select Form 1040 from the list on the left. Make note of the new Total Tax.

 

Subtract the new Total Tax from the original. This is the amount of your Claim of Right Credit.

 

Applying the credit

 

Now, you will return to the current tax year. The credit can only be applied using the TurboTax Desktop product installed on a computer, in the Forms mode.

 

Once you have installed the program (and, if necessary, transferred your online data), follow these steps to enter the credit that you have figured.

  • ​​​Switch to Forms mode by clicking on Forms icon in the program.
  • In the list of forms on the left click on 1040/1040RSR Wks above the Form 1040 itself.
  • Scroll down to Other Credits and Payments Smart Worksheet (near the bottom) and enter the amount that you have computed on Line D Claim of Right, IRC 1341 credit for repayments of prior year income.
  • Click on the Step-by-Step or Easy Step icon in the upper right corner to return to the interview mode and finish working on your tax return.

See this TurboTax Help.

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