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If you had to repay any unemployment compensation (note the method would be similar for repaying any nonbusiness income) in 2020 which you received in 2020, subtract the amount you repaid from the total amount you received and enter the difference on your return. On the dotted line next to your entry, enter "Repaid" and the amount repaid. The TaxAct program does this for you automatically when you enter the information from your Form 1099-G Certain Government Payments for unemployment income.

To enter your unemployment income:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Other Income in the Federal Quick Q&A Topics menu to expand, then click Unemployment compensation.
  3. Click + Add Form 1099-G Unemployment to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.
  5. On the screen titled Unemployment Income - 1099-G - Compensation, enter the Current year's unemployment repaid amount, then click Continue.

If you had to repay an amount in 2020 that you included in your income in an earlier year, you can deduct the amount repaid on Schedule A (Form 1040) Itemized Deductions, Line 16, if you itemize deductions and the amount is $3,000 or less. If the amount is more than $3,000, see Repayment over $3,000 following these steps.

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Other Income in the Federal Quick Q&A Topics menu to expand, then click Unemployment compensation.
  3. Click + Add Form 1099-G Unemployment to create a new copy of the form or click Edit to review a form already created.
  4. On the screen titled Unemployment Income - 1099-G - Compensation, enter the Prior year's unemployment repaid amount, then click Continue. If the amount is $3,000 or less, the program will transfer the correct information to Federal Schedule A, Line 16.

Repayment over $3,000

If the amount you repaid was more than $3,000, you can take a tax credit for the year of repayment if you included the income under a "claim of right." This means that at the time you included the income, it appeared that you had an unrestricted right to it.

Figure your tax for 2021 claiming a credit for the repaid amount. According to IRS Publication 525 Taxable and Nontaxable Income, on page 35, you should follow these steps:

  1. Figure your tax for the year of repayment without deducting the repaid amount.
  2. Refigure your tax from the earlier year without including in income the amount you repaid in the year of repayment.
  3. Subtract the tax in (2) from the tax shown on your return for the earlier year. This is the credit.
  4. Subtract the answer in (3) from the tax for the year of repayment figured without the deduction (step 1).

To enter the credit into the TaxAct program:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Miscellaneous Topics in the Federal Quick Q&A Topics menu to expand, then click Credit for repayment (I.R.C. 1341).
  3. Continue with the interview process to enter all of the appropriate information.
  4. On the screen titled Credit for Repayment, enter the I.R.C. 1341 credit amount of the credit you figured previously, then click Continue.

The text "IRC 1341" will appear next to Schedule 1 (Form 1040) Additional Income and Adjustments to Income, Line 7 when the return is printed.

An example of this computation can be found in IRS Publication 525, on page 35. Additional information is available in IRS Publication 17 Your Federal Income Tax For Individuals, under the "Repayments" section on page 69.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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