I am an active duty Marine. I left active duty in 2013 and took a severance package that was taxed at 25%. There was an undisclosed caveat about having to pay back the pre-tax amount if I returned to active duty for longer than 180 consecutive days. Well, I have been paying back the severance pay in $1340/mth pay garnishments. Since I already paid taxes on the severance pay when I received it, and am now having to pay in back from my salary, is there a way to write off the garnishment amount on my federal taxes? I am going to have to pay back the entire severance package, including the amount that the gov't kept for taxes (a chunk that I never saw). I should get a break on my current income correct?
What you are saying certainly makes sense to me. Unfortunately, 2013 is a "closed" year -- otherwise, I would advise you file an amended tax return for 2013 and reduce your taxable income by the amount that you are required to pay back. Also, you didn't say whether you have yet received your W-2 from the government for your 2018 wages. Perhaps the garnishment will be reflected somehow in your W-2 as a reduction to your wages.
Ms. Willi is a tax attorney, CPA, and Ohio-Certified Specialist in Estate Planning, Trust & Probate Law, with offices in Westerville, Ohio. She serves client families and private business owners throughout Ohio. Ms. Willi responds to Avvo questions as a public service to help educate and provide general guidance to questioners, but her responses are not legal advice and do not create an attorney-client relationship. Her posts are provided for informational purposes only and are not a substitute for advice provided by an attorney or licensed tax professional. Her phone number is 614-890-0500 and her website is www.willilaw.com.
It is possible that the wage garnishment may reduce the tax withheld and your 2018 taxable income. You should check your 2018 W2 carefully to see if that has occurred. Alternatively, it is too late to file an amended return for 2013 to request a refund of overpaid income tax.
This information is provided for educational purposes only, and is not to be relied upon as legal advice. You should consult with an attorney with full disclosure of all facts and opportunity to consider all or alternative options.
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