Was your client one of the 29,000 PERS benefit recipients that needs to repay a portion of their PERS back they received between April 2000 – April 2004?  The repayment option they choose, will determine how to report the income on their taxes (see below).

 

Once PERS begins the recovery process, the client will receive a Form 1099-R from PERS each year reporting the benefits paid in that calendar year.  Report the amount on the 1099-R on your client’s tax return each year.  You will not make any adjustments on your client’s tax return.

 

If your client paid Oregon tax on PERS income they received in April 2000 through April 2004 and are now paying a portion back, they qualify for a claim of right.  For Oregon, you can claim a subtraction or credit the year the client makes the repayment.  On the federal return, you can also deduct the repayment or claim a credit.  See Oregon Publication 17 ½ for further explanation and to determine if the subtraction or the credit is more beneficial.   (http://www.oregon.gov/dor/PERTAX/Pages/pubs.aspx)

 

Claim of right subtraction – If the credit was claimed on the federal return, report the amount paid back to PERS this year as an “other subtraction” – subtraction code 302.  If the repayment was deducted on the federal return, it will flow through and no additional subtraction is required on the Oregon return. 

 

Claim of right credit – If the repayment was deducted on the federal return, add it back on the Oregon return before claiming the credit for Oregon.  To claim the credit enter the amount, as computed using the worksheet in the publication 17 ½, on the estimated tax payment line in the year it was repaid.  For tax years 2012 and later, check the “claim of right” box below the estimated tax line and include the credit amount on the estimated tax line.  For prior years, see form instructions.       

If your client chose the payment arrangement with PERS to pay back the overpayment, they will qualify for a claim of right for the amount repaid each year.  See Oregon Publication 17 ½ for further explanation to determine if the subtraction or the credit is more beneficial.  

 

Claim of right subtraction –If the credit was claimed on the federal return, report the amount paid back to PERS as an “other subtraction” – subtraction code 302.  If the repayment was deducted on the federal return, it will flow through and no additional subtraction is required on the Oregon return. 

 

Claim of right credit – If the repayment was deducted on the federal return, add it back on the Oregon return before claiming the credit for Oregon.  To claim the credit enter the amount, as computed using the worksheet in the publication 17 ½, on the estimated tax payment line in the year it was repaid.  For tax years 2012 and later, check the “claim of right” box below the estimated tax line and include the credit amount on the estimated tax line.  For prior years, see form instructions.  You can use any reasonable method to determine which year’s distribution the client is paying back (first in first out, last in first out, average, etc).