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Old 01-24-2019, 01:27 PM
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Red face Claim of rights credit

In 2016 and 2017, I received long term disability payments. In 2018, I repaid over 21,000 of these benefits. At no time did I receive an amended tax form to reflect the difference.

After researching this issue a little, my interpretation is that I cannot file a 2016 or 2017 amended return to correct the income, but rather I should file I Claim of Rights Credit (Claim of Right- IRC Section 1341) on my 2018 return.

Basically from what I understand, I should calculate how much less I would have had to pay in taxes during 2016 and 2017-when I received income that was later required to pay back, after subtracting the payback amount. Then I can claim the difference as a credit.

Here are my questions:
1. With the new 2018 form, what line and schedule should I write in the credit? And is it accurate that I need to just write in the credit amount and the phrase "?I.R.C. 1341?
2. Is there a form for this credit or any additional documentation I need to include? I could not find anything on this but seems odd just to calculate an amount and write it in.
3. Is there anything else important to note regarding this claims of right credit that I might not understand?
4. Is there anything I can do regarding this credit to try to prevent an audit? My claim is legitimate but came across an IRS memo that some people are falsely using this credit, and no one wants an audit in their life.
5. How can I get state of Michigan and city of Detroit taxes overpaid back as well? I could not find anything on this.

Thank you so much for your help!



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Old 01-26-2019, 01:34 AM
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Join Date: Oct 2010
Posts: 5,227
In 2016 and 2017, I????.At no time did I receive an amended tax form to reflect the difference.======>>.you need to To determine if the LTD Benefits you received are taxable or not, you have to know who paid the premium for Long Term Disability Benefits.
If the long-term disability premium is paid by the employer (and NOT included in the taxable income of the employee)or If the long-term disability plan premium is shared between employer and employee, the employee is entitled to receive benefits equal to his/her contributions on a non-taxable basis. The amount that is in excess to your contributions are taxable. Then, the benefits ARE taxable and must be added to your tax return. And since you should pay back the ltd benefits, you must file 16~17amended returns for tax refunds from irs.
If the LTD premium was paid by the employer BUT it was included in the taxable income of employee,or If the long-term disability premium is paid by the you, the employee ,then the benefits are NOT taxable. In this case you do not need to file 1040x for 2016~17
.


After researching this issue a little, my interpretation is that I cannot file a 2016 or 2017 amended return to correct the income, but rather I should file I Claim of Rights Credit (Claim of Right- IRC Section 1341) on my 2018 return.
=======>>as mentioned above, it depends. The Social Security Administration offers 2 programs that provide long-term disability income. Supplemental Security Income makes disability payments based upon financial need and is always untaxed. Social Security Disability Insurance pays benefits based on the Social Security taxes you've paid. Social Security benefits that are your sole income source are generally not taxable. Part of your SSDI benefits may be taxable if you also have other sources of income


Basically from what I understand, I should calculate how much less I would have had to pay in taxes during 2016 and 2017-when I received income that was later required to pay back, after subtracting the payback amount. Then I can claim the difference as a credit.

Here are my questions:
1. With the new 2018 form, what line and schedule should I write in the credit? And is it accurate that I need to just write in the credit amount and the phrase "?I.R.C. 1341?=====>>>as said it depends.
2
4. Is there anything I can do regarding this credit to try to prevent an audit? My claim is legitimate but came across an IRS memo that some people are falsely using this credit, and no one wants an audit in their life.=======>>I do notthink so.it is up to irs deision if they perform audit.
5. How can I get state of Michigan and city of Detroit taxes overpaid back as well? I could not find anything on this.=====>>> As each circumstance is different and laws vary from state to state on disability insurance premiums and payments, you need to contact tax dept of your home state.



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