How is repayment of unemployment compensation treated on the tax return - NYS Department of Labor overpayment help
I just got hit with a $4,200 overpayment notice from NYS Department of Labor saying I need to pay back benefits from 2023. My tax preparer is telling me there might be some way to claim this repayment on my 2025 tax return but isn't sure how it works with unemployment. Has anyone dealt with this before? I'm trying to figure out if I can get any tax relief since I already paid income tax on those benefits when I received them. The overpayment was because of some work hours that got reported late by my employer.
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Gianna Scott
You can actually deduct the repayment on your tax return! There are two ways to handle unemployment compensation repayments. If the repayment is under $3,000, you deduct it as a miscellaneous itemized deduction on Schedule A. If it's over $3,000 (like yours), you can either take the deduction OR claim it under Section 1341 which might give you a bigger tax benefit. Section 1341 lets you calculate the tax as if you never received the income in the first place.
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Edwards Hugo
•Thank you! Do I need any special forms from NYS Department of Labor to prove the repayment for my taxes?
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Gianna Scott
•Yes, keep all your repayment documentation from NYS Department of Labor including the overpayment notice and any payment receipts. You'll need Form 1040X if you're amending previous returns, or just include it on your current return if you're repaying this year.
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Alfredo Lugo
ugh this happened to me too last year with a $2800 overpayment. my CPA said since it was under 3k I could only do the itemized deduction thing but it barely helped because the standard deduction was higher anyway. such a pain dealing with NYS Department of Labor mistakes
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Sydney Torres
•Wait, so if you take the standard deduction you can't claim the repayment at all? That seems really unfair!
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Kaitlyn Jenkins
I've been trying to reach someone at NYS Department of Labor about my overpayment notice for weeks. Their phone system is impossible - either busy signals or I get disconnected after waiting forever. I found this service called Claimyr (claimyr.com) that actually gets you through to a real NYS Department of Labor agent. They have a video demo at https://youtu.be/qyftW-mnTNI showing how it works. Saved me hours of frustration and I finally got my questions answered about the repayment process.
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Edwards Hugo
•How much does something like that cost? I'm already stressed about having to pay back $4,200.
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Kaitlyn Jenkins
•It's worth checking out their site for details, but honestly after spending days trying to get through on my own, it was a lifesaver. Got connected to an agent who explained exactly what triggered my overpayment and what documentation I needed.
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Caleb Bell
OK but like why is this so complicated?? You get money, you pay taxes on it, then they want it back and you have to jump through tax hoops to maybe get some relief. The whole unemployment system is backwards.
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Danielle Campbell
•I know right! And half the time the overpayments aren't even the claimant's fault - it's employer reporting errors or NYS Department of Labor system glitches but we're the ones who suffer.
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Rhett Bowman
just went through this exact situation! definitely look into the section 1341 thing the other person mentioned. my accountant said it saved me like $800 compared to just taking the deduction. you basically get to recalculate your prior year taxes as if you never got that unemployment money
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