Fearless wrote:

- quote -

If you have to return money that you received in a prior tax year
that you reported as taxable income then you have a "repayment"
for which there is a defined set of rules. The IRS explains the
rules starting on page 31 of IRS Pub 525.

In your case, as the repayment is in excess of $3000 you may
either deduct the repayment as a Misc. Itemized Deduction Not
Subject to the 2% AGI limitation (Line 27 of Schedule A) or you
may compute a tax credit. The credit is a what-if computation. No
amending of prior year tax returns is performed. You go back to
the prior years and recompute your tax bill as if you had never
received the income. You then find the difference between your
actual tax bill for the prior years and the refigured tax bill.
That becomes the credit. You subtract the credit from your
current year taxes figured without any deduction for the
repayment. You would select whichever method (deduction or
credit) provides the lowest tax in the current year.

--
Alan
http://taxtopics.net

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

"A.G. Kalman" <glendale202-taxes[at]yahoo.com> wrote:

- quote -

This is very helpful. Thank you for your advice.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:

- quote -

This is not a tax case, but a suit involving Oregon's
Administrative Procedures Act covering the administration of
the Public Employee's Retirement System. The case was
automatically remanded to the Oregon Supreme Court by the
Legislature, and the lawyers on both sides of the cases have
determined that there are no federal issues involved. There
is a separate case pending in the US 9th Circuit Court of
Appeals, but it doesn't involve retirees.

Thanks for your information. It is helpful.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

Fearless wrote:

- quote -

See "Claim of Right" (IRC Section 1341). If the difference
exceeds $3,000.00 of income, you may be entitled to a tax
credit instead of a NON-2%-floored miscellaneous itemized
deduction. The year to enter this is the tax year in which
the court case becomes final (there is one more appeals
possibility - to the U.S. Supreme Court).

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

Fearless wrote:

- quote -

If you have to return money that you received in a prior tax year
that you reported as taxable income then you have a "repayment"
for which there is a defined set of rules. The IRS explains the
rules starting on page 31 of IRS Pub 525.

In your case, as the repayment is in excess of $3000 you may
either deduct the repayment as a Misc. Itemized Deduction Not
Subject to the 2% AGI limitation (Line 27 of Schedule A) or you
may compute a tax credit. The credit is a what-if computation. No
amending of prior year tax returns is performed. You go back to
the prior years and recompute your tax bill as if you had never
received the income. You then find the difference between your
actual tax bill for the prior years and the refigured tax bill.
That becomes the credit. You subtract the credit from your
current year taxes figured without any deduction for the
repayment. You would select whichever method (deduction or
credit) provides the lowest tax in the current year.

--
Alan
http://taxtopics.net

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

Recently (2 days ago), the Oregon Supreme Court let stand a lower court
ruling in a very complex case involving the Oregon Public Employee Retiree
System. There was a previous (March) Supreme Court ruling involving
Legislative Changes to the Oregon Public Employees Retirement System as
well. Finally, a year ago, some of the combatting parties (but not all)
entered into a "settlement" agreement to "settle" disputed parts of the
decision that resulted in the ruling 2 days ago. Complex history, but
simple point and question to follow.

The nub of the ruling is that the Board of the Public Employees Retirement
System abused its discretion in failing to fund two reserves of the system
and instead credited money that should have gone into those reserves to
member (employee) accounts. So, for the calendar year 1999, the fund earned
25.99%, and 20% was credited to employee accounts. According to later
analyses, only 11.33% should have been credited. The initial decision
didn't come down until late October 2002 and the judge's order remanding the
rates back to the Board for further action did not come down until February
2003, and the settlement followed in 2004. During the period affected by
the 20% crediting decision and prior to the "settlement" (4/1/00 - 3/1/04),
more than 35,000 members retired from the system and started drawing
benefits. Absent any authority to do anything about this yet, the pension
system computed benefits based on the now (5 year's later) excess 1999
earnings. The effect of all the prior litigation and the courts ruling is
to go back to those retirees, refigure their benefits using the adjusted
1999 interest rate, bring their benefits current by applying the statutory
COLA increases and either increase or reduce the current monthly benefit.
That's the easy part. The hard part is that they plan to invoice members
for the amount of the overcredit paid out as monthly benefits between the
date of retirement and some arbitrary date in the future (expected to be
1/1/06) when all these other changes take place.

Now for my question:

If I get a bill for, say, $15,000 representing overpaid pension benefits
(spanning 3 or 4 different tax years) that I've already paid taxes on in
previous years, where and how do I receive credit for this on taxes filed
for the year in which the money is repaid? Revised 1099-R's are out of the
question, as is filing amended returns for every year back to, potentially,
2000 (I retired in mid-2002). I've avoided asking this question up to now
because we have long believed that the Board acted within its statutory
mandate to decide when, whether, how, and if those reserve funds are funded.
Their actions in 2000, for 1999, were not in the least out of character for
decisions made in previous years. But the courts have ruled otherwise; 1999
was the furthest they could go back; subsequent years have been funded to
the extent earnings permitted, and in 2003 the legislature put language into
statutes that make it impossible for the board to NOT fund these reserves.

Thanks for any advice, pointers, etc you can offer.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >