I had to pay back third party sick pay from 2 years ago of $15,325 and $26,745, respectively. When I calculate my adjusted gross income without the sick pay for that year, I would have qualified for the earned income credit. Can you also include that amount in the credit for this year under IRC 1341?

ANSWER

The BIDaWIZ Team's Answer:

You would need to amend your returns for those years to claim the earned income tax credit. The IRC section 1341 provision allows taxpayers that repaid more than $3,000 in taxable income to either claim a credit for the difference in taxes when excluding the previously taxable income or to report the difference as an miscellaneous itemized deduction on Schedule A of their form 1040. The taxpayer should chose the option that provides the greatest tax benefit. But, the IRC 1341 provision, doesn't in itself include the earned income tax credit.