Disability Benefit payback

[neilbrink]

Client was receiving disability checks from an insurance company until he was accepted for disability benefits from social security. Social security made the benefits retroactive and paid back payments to my client. My client then had to repay the insurance company in 2012 for benefits that he received in 2011. The benfits were already included on his 2011 return. The letter from the insuance company implied that since he made the payment for back pay in 2012, they amount should be considered on the 2012 tax return. However, since the amount was taxed in 2011, should the 2011 return be amended with the amount paid back be included for 2011?

Thanks.

[Lion EA]

No. Cash basis tax payer repaid the money in 2012.

[jainen]

>>client then had to repay the insurance company in 2012<<

See "repayments" on page 33 of Pub 525. It might not seem fair, but that's the way you have to do it.

[BulldogTom]

Yeah, it is not fair. It is an itemized deduction on line 28.

Tom

Hollister, CA

[neilbrink]

What is really unfair is that this client has no tax liability for 2012?