Cash basis taxpayers include amounts in gross income in the tax year received. If they must pay back the income amount in a later tax year, a deduction OR a tax credit may be allowed in the year of repayment--thus, the return for the year the income was originally claimed is not amended. However, return data from that previous tax year may be needed in order to compute the repayment year deduction or tax credit (whether to claim a deduction or credit, or for years 2018-2025 if certain deductions can be claimed, depends on which method produces the lower tax AND the amount of the repayment).

Related IRC and IRS Publications and Forms