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I was overpaid at a previous job and had to pay it back ...

Sent to Tax Experts February 24 02:57 PM

I was overpaid at a previous job and had to pay it back last year with after tax funds. Can I take this as a deduction? and if so where do I deduct it?

Customer (name blocked for privacy)
Status:  Closed   Value: $10
Answer
February 24 3:07 PM (10 minutes and 32 seconds later)
         
REPLIEDCheck Mark
If you had to repay income in 2005 that you earned in another year, and it is under $3000, you can deduct it as a miscellaneous deduction on Schedule A subject to the 2% of adjucted gross income limitation.

If it is greater than $3000, you may be able to deduct it as a miscellaneous deduction on Schedule A, or take a credit against your tax.

Best of Luck with your situation. If you feel I answered fairly, please hit "ACCEPT". If not, let me know! Feedback and bonuses welcome!    Wendy D. Rieger, Enrolled Agent
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Wendy Rieger -- Enrolled Agent -- 100% Positive Feedback on 1732 Tax Accepts
10+ years tax preparation and tax advice.
Reply
February 24 3:19 PM (11 minutes and 10 seconds later)
         
Reply to Wendy Rieger's Post: Hi Wendy,
it was over 3000.00, and I expect a tax refund regardless of this deduction. So do you mean that I may or may not be able to deduct it on Schedule A? Do you know what the criteria is for being able to take the deduction?

Thanks!
Customer (name blocked for privacy)
Answer
February 24 4:07 PM (48 minutes and 1 second later)
         
ACCEPTEDCheck Mark
The criteria are as follows:

If you were an employee (pay reported on W2), and this was income in your trade or business, and you reported it in a previous year under a claim or right-(which means you thought that you had unrestricted right to the income)--if you repaid over 3000 dollars in 2005, you can take either a credit or a miscellaneous deduction, whichever benefits you more.   

The instructions on how to compare the credit or deduction can be found in Pub 525. Here is the link, it is towards the end of the page: http://www.irs.gov/publications/p525/ar02.html

Best of Luck with your situation. If you feel I answered fairly, please hit "ACCEPT". If not, let me know! Feedback and bonuses welcome!    Wendy D. Rieger, Enrolled Agent
Picture
Wendy Rieger -- Enrolled Agent -- 100% Positive Feedback on 1732 Tax Accepts
10+ years tax preparation and tax advice.
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