Payroll reversal - do I still need to claim this on my tax return?

[temperaturesealion]

Hi, I had a payroll reversal recently - wrong payment, and I gave the money back.

This was the only paycheck from that employer. It was below $150. I received a form 1099 NEC in January for it. The payroll reversal was granted in April.

Do I still need to attach that 1099 NEC to my tax return? Technically, it’s not my income.

[DianeW777]

It depends.  If the company is not going to issue a correction to the 1099-NEC, since the money was repaid you could include it as other income. It is technically required to be reported when a repayment occurs in a different tax year than the payment was received. It's not self employment income based on your comments it was paid by an employer. 

Year of repayment: The repayment in 2024, under current tax law, would not be a deduction on your 2024 tax return because it is below $3,000.

Other Miscellaneous Income:

1. Go to the Wages and Income  section of TurboTax
2. Scroll to  Less Common Income > Select  Miscellaneous Income, 1099-A, 1099-C
3. Select Other reportable Income > Enter a description (----) and the amount

                                        

[temperaturesealion]

Thank you for your thorough answer. 

I added the amount to my tax return and my tax refund lowered. It felt unfair because this amount I gave back anyway, and it wasn't my income to begin with. Do you know if after the company issue a tax correction to my form 1099 NEC, can I get the refund amount back? 

[LeticiaF1]

If the company issues you a corrected 1099-NEC, you will need to file an amended return to get the refund amount back.   Before you amend make sure that your original return has been fully processed by the IRS, this means that you have received your refund or that you have already paid if you had a balance. Once you are ready, to amend your return:

1. Log in to your TurboTax account
2. Go to Tax Home
3. On the FAQs on the right side, select How do I amend my return?
4. The option of Amend Using TurboTax will show, select it.

The program will guide you as you make the changes necessary, you do not need to enter anything other than what you are changing.  

[temperaturesealion]

Hi, thank you for your thorough response.

I have not filed taxes yet, since I am living abroad (no income abroad) so I presume I am eligible for the extension until June 15 to file. I received the corrected 1099-NEC (adjusted income to $0.00), but it says the 1099-NEC status is "filing in progress" on the company's payroll portal. It could mean that IRS hasn't processed the corrected 1099-NEC yet. It was filed on April 19, 2024, so past the tax deadline. 

My question is: do I have to include this 1099-NEC on my tax return? I know I don't have to report no income 1099-NEC. But this adjustment was filed after April 15 - does that change anything?

[KristinaK]

No, you do not need to include the original 1099-NEC on your tax return since it was negated by the corrected 1099-NEC showing zero. It's ok that the IRS hadn't processed it by 04/15. That is not the goal. The goal is to have the corrected form for the correct year and you have it.