DFAS Form 705 - Claim of Right

[kjm1059]

Hello

My client received a DFAS Form 705 for overpaid wages.  His repayment was approximately $18,000 for Tax Year 2019.

My research showed that he is eligible for a Claim of Rights Credit, IRS Section 1341.

I located the area where this is handled in ProSeries.  My question is:  Is the credit in the amount of $18,000 or is there another calculation involved?

Any thoughts on this would be most helpful.

[garman22 · Accepted solution]

Claim of right credit is not $18k. Taxpayer paid tax on $18k in the year he/she claimed said income. The credit is the amount of tax they paid in that year due to that extra income. You may want to file your return without (assuming substantial refund) beforehand and then amend for claim of right. But thats your clients call. My client had a refund without claim of right and because of claim of right took IRS a full year to issue full refund. PITA. 

[kjm1059]

Thank you for your response.  Extremely helpful.   So, if I understand correctly, I would have to figure the tax on the $18k and that result is the amount of the credit?