Question for anyone familiar with federal workers comp / repayment tax issues:
I received continuation-of-pay / wage replacement benefits after a work-related injury under the federal workers compensation system (not state workers comp), and those payments were included in my W-2 taxable income for the year.
Now, due to a third-party settlement, I have to reimburse part of those wage-loss benefits back.
So essentially:
I paid taxes on money that I later have to give back.
My question is:
If you repay income that was already taxed and included on your W-2, is there some kind of tax credit, deduction, or adjustment available the following tax year?
I’ve seen people mention:
- claim of right doctrine
- IRC 1341
- deductions vs credits for repaid income
Not asking for formal tax advice — just trying to understand the general process and whether this is something most CPAs are familiar with. TIA