What happens when I have to re-pay the unemployment benefits that I received and paid Federal taxes on?

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What happens when I have to re-pay the unemployment benefits that I received and paid Federal taxes on?

Was the unemployment compensation received in 2020? If so, did you get a refund from the IRS due to the unemployment compensation exclusion on a 2020 tax return?

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What happens when I have to re-pay the unemployment benefits that I received and paid Federal taxes on?

It was received in 2021

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What happens when I have to re-pay the unemployment benefits that I received and paid Federal taxes on?

Did you repay all of the unemployment compensation you received in 2021?

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What happens when I have to re-pay the unemployment benefits that I received and paid Federal taxes on?

I'm yet to re-pay all of it yes, not yet though. its in my "over-payment balance" now.

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What happens when I have to re-pay the unemployment benefits that I received and paid Federal taxes on?

@kusaii wrote:

I'm yet to re-pay all of it yes, not yet though. its in my "over-payment balance" now.

If you repay the any or all of the amount of unemployment in 2021 you will report the income and repayment on your 2021 federal tax return. Use the Unemployment section under Wages & Income in TurboTax. All of the federal taxes withheld will be reported on the 2021 return as a tax payment. You will receive back a percentage of the federal taxes withheld based on the amount of unemployment that was repaid in 2021.

It would make tax reporting simpler if you repay the entire amount in 2021.

If all of the 2021 unemployment is not repaid in 2021 then on your 2022 tax return you will have to report the amount repaid in 2022. You can then use the Claim of Right to get a tax credit on the 2022 return. This will take some calculations on your part that is outside of the TurboTax program.