SSDI overpayment

Sanny66
Sanny66 Member Posts: 1 Newcomer
in After you file

I had to pay back some of my SSDI in 2021 for an overpayment in 2020. Can I claim the right to credit repayment? If so, would I amend my 2020 taxes or 2021? what forms are needed as well?

Thank you

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Answers

  • Henry
    Henry FreeTaxUSA Agent Posts: 88

    Hi Sanny66! If you had to repay over $3,000 that you included in your income in an earlier year, you may be able to take a credit against your tax for the year in which you repaid it. This only applies to income that was included under a claim of right, which means that it appeared you had an unrestricted right to it. Repaid social security benefits and repaid unemployment compensation are common examples of claim of right income repayment.

    The credit would be claimed on your 2021 tax return (the year in which the income was repaid), so you could amend your 2021 return to include that credit if you qualify to claim it.

    You can go to the following link to access your 2021 account: https://www.freetaxusa.com/2021

    To start a 2021 amendment, click on the 'Amend Tax Return' link provided on the right-hand sidebar in your 2021 account. When you are ready to enter information about the income you repaid, select Deductions/Credits > Other Deductions/Credits > Claim of Right Repayment Credit from the menu.

    To calculate the Claim of Right Repayment Credit, you'll need to recalculate your tax from 2020 without including the income that was repaid in 2021. An easy way to do this would be to start a 2020 amendment and change the amount of social security benefits reported to see how the tax calculation changes (you can contact customer support to have the unfinalized 2020 amendment removed from your account when you are done). Then subtract your recalculated 2020 tax from the tax shown on your original 2020 tax return. This is the amount of your repayment credit.

    The IRS has said that some returns with the Claim of Right Repayment Credit have a higher risk of audit. Make sure that you accurately claim and document your credit. Documentation the IRS may ask for includes:

    • Copies of bills, notices, or similar documents showing the amounts to be repaid
    • Canceled checks, money orders, paycheck deductions, or highlighted bank statements showing repayments
    • Documents showing the income amounts, type of income, and the year you included the income on your tax return.

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