I have a client who received a lump sum retroactive payment of US Social Security in 2018. This amount was recorded on his 2018 tax return and tax was paid on the amount received. In August 2019 he received a notice that this retroactive payment was issued to him in error and he is now required to repay the full amount he received in 2018 back to the US government. The client agrees that he owes the money back. The client wishes to claim a credit on his 2019 tax return for the tax he paid in 2018 on the amount he is paying back. I am not sure how to do this. Your help is appreciated. Thanks.
I think you will need to file an amended T-1 tax return.
File an amended T1 for 2018. And request the refund to be carried forward to 2019.
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You do NOT amend 2018. You claim the repaid amount on the 2019 return as repaid income on line 232.
That is correct Jeanette. Thank you. I was advised by CRA to record the repaid amount LESS the 15% US Social Security exempt portion (taken on line 256 of his 2018 tax return) on line 232 (other deductions) of his 2019 tax return. In the event that CRA assesses the line 232 amount the client would have to provide a statement from US Social Security showing the amount repaid to them in 2019.