I have a LOT more good information for you in The Short Cheap Tax Book for the Military.
If you received income, that you thought you were entitled to, like Military Bonuses, VA payments, AFLAC type income replacement, Social Security and many others, and you paid taxes on it, and THEN someone took it back, you are entitled to get the taxes you paid on it back (sort of):
Each year that you pay back taxed money (they will garnish wages and take tax returns - FYI) you will be able to claim that on your tax return for the current year.
They will send you a letter detailing the amount they took for the year (maybe - you should track the amount they take to the dollar, just in case.)
With this you can do a "Claim of Right" deduction or credit.
If the amount is less than $3000, it is an itemized deduction (which sucks if you don't itemize).
If the amount is more than $3000, you can either take the deduction above, or a credit for the taxes paid on the original tax return, whichever is better.
The credit gets complicated and will require a fair amount of record keeping if you repay over multiple years. Essentially you will recalculate the tax return for the year of the bonus, and figure out the taxes you paid on money you repaid. You then get that amount back on the current year's tax return. It's refundable, so you will get the money no matter what.
I strongly encourage ensuring that in any year they take money that you pay at least $3000. This is the only way to be sure to get all the taxes you paid back.
Each year you do the credit, you have to refigure the tax return including the changes from any previous credit calculations.
Make sure you find a copy of your tax return for the year of the bonus.
You can get a transcript from www.irs.gov by setting up an account or having them mail you one. The transcript is all you should need, so don't get the full copy since that can cost money. Here's a direct link to the right page: TRANSCRIPT
Each state handles claim of right in their own way, so you might need assistance with the State.
Tax guides, tax advice, and tax news...all in English! Real Estate Agents, MLM business owners, military and contractors will all find great information here. If you had canceled debt, you will find useful advice here. All of this written by the author of The Best Tax Book Nobody Buys!
Sunday, October 19, 2014
Reenlistment Bonus, Social Security, Compensation Repayment and Taxes
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Master Chief Petty Officer Kirk Taylor (R), this is indeed helpful information - thank you for bringing it forward.ReplyDelete