I was overpaid wages in one year and paid taxes on it that year?

Question

do to our benifit agreement if i received other monies from the goverment and received sick pay benifits those monies will be deducted from my disability check. How ever it took eight months to received goverment moneis and so I was overpaid quite a bit. now there deducting that over payment from future benefit do I have to pay tax on that if i really paid taxes at the time of over payment.

Answer 1

I am a tax professional who has dealt with this personally. There are two ways to go about this. One is to amend prior returns to who the corrected amounts, but then you'll owe this year on everything you got this year. The second way is to take a credit (reduce your tax) by the tax you paid in prior years but did not owe. This is a complex situation, and you need to look into both options before deciding, because one may not work for you.
Even if you don't regularly have your taxes prepared professionally, I would take it to someone this year. But be sure that you call ahead and make an appointment with someone who knows how to handle this situation. You probably don't have a one-stop return this year, but one that will require some time to figure out how to best file. Also, it might be a good idea to call H&R Block or some other service and sit down with someone now, just to ensure that things will go your way, and that you don't need to make an estimated payment. YOU PROBABLY DON'T. Most likely you'll wind up getting some money back. But you want to make sure so that you don't wind up owing a penalty. Many places will take a quick look at no charge.
If I can be of further assistance to either you or your tax pro, let me know. You can e-mail me through the site, and I'll get back with you.

Answer 2

You owe taxes on income when received (cash basis).
If you already received your benefits that's when it was taxable.
If they reduce future benefits you will be taxed only on the net amount remaining after the deduction.

Answer 3

No, you won't.