Oregon Pension overpayment

Feb 22, 2013 5 Replies

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Avrum Lapin 13 years ago

Client received a pension from Oregon PERS for a number of years and then rolled it over to an IRA.

Client receives a letter from Oregon PERS indicating that he was overpaid by $600 over the years that he received the pension and he needs to repay the pension in 2013 or come up with a suitable payment plan.

If client repays $600 in 2013 how does he show that on his tax returns preferably by not filing umpteen 1040X. Client does not itemize.

While not within the scope of AARP TaxAide I'd like to help him when he shows up next year.

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Alan 13 years ago

From a tax perspective, a repayment of $3000 or less becomes a miscellaneous itemized deduction (Line 23 Schedule A). If he can't itemize, there is no tax benefit of the repayment.

See Repayments in IRS Pub 525.

By the way... what we have here is known as a recoupment. Treasury regulations allow for recoupment. Additionally, there is a fiduciary responsibility to get back the over payment. All that being said, the regulations allow for the pension plan to make a hardship exception on a case by case basis.

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remove ps 13 years ago

Is it subject to the 2% of AGI rule and AMT?

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Alan 13 years ago

Only Line 28 of misc. deductions is not subject to the 2% rule. And, yes, it is disallowed eduction for AMT.

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remove ps 13 years ago

This discrminates against poor people, who are like to have smaller repayments. Maybe one can fight this in court using say "due process" or something.

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Alan 13 years ago

Already been litigated. You need Congress to change the tax code.

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