Pension Payment Clawback

Is the amount more or less than $3000?

[Edited]

Since she died in December 2023, it seems that the claw-back would be for January 2024 pension payments, not 2023 pension payments.  If so, nothing would need to be done regarding the claw-back because the payers would not be issuing any 2024 Forms 1099-R reporting the income.

What we need to know is the timing, and the forms, and how it was recorded.

1. For example, suppose pension payments are made on the last day of the month but only for months where the recipient is alive.  Your mother received $1000 per month in 2023, and received a 1099-R showing $12,000 of income.  But, in January the payor asked for the December payment back.  In that case, the 2023 1099-R shows income of $12,000 (and she pays tax on $12,000) but $1000 was required to be repaid.

In this situation, there is a possible tax remedy if the amount repaid is more than $3000, but if the amount is $3000 or less, there is no remedy, the money is just gone.

2. On the other hand, suppose payments are made on the first day of the month for months where the recipient is alive.  Your mother received $1000 per month in 2023, and received a 1099-R showing $12,000 of income.  She also received $1000 on January 1, 2024.  That January payment was later clawed back.  

In this situation, the 1099-R for 2023 and the tax return are correct, she received $12,000 and reported $12,000.  For 2024, she received no income ($1000 minus the clawback).  She should not receive a 1099-R for 2024.  If she does receive a 1099-R for 2024 in the amount of the original payment, you can deal with that next year.  But there is nothing to do now but wait and see what happens.