Section 1341 Credit

DEFINITION of 'Section 1341 Credit'

A tax credit available for taxpayers who are repaid in a later year more than $3,000 in wages from a prior year. Section 1341 allows taxpayers to claim a credit for taxes paid on wages not received from the previous year. The Section 1341 credit thus allows taxpayers to avoid filing an amended return for the previous tax year.

BREAKING DOWN 'Section 1341 Credit'

The Section 1341 credit is on line 70 of Form 1040. The taxpayer must write "IRC 1341" in the blank space next to the box. The credit is computed by refiguring the tax return from the previous year as if the wages had not been paid. Then the difference in tax is claimed as a credit on the current year's return. The taxpayer also has the option of either claiming the credit or deducting the repayment as a miscellaneous itemized deduction, whichever provides the greater benefit.

RELATED TERMS
  1. Tax Benefit

    A tax benefit is an allowable deduction on a tax return intended ...
  2. Substitute Return

    A tax filing that the IRS will create for a taxpayer in order ...
  3. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
  4. Phase Out

    1. The gradual reduction of a tax credit as a taxpayer approaches ...
  5. Non-Refundable Tax Credit

    A tax credit that can't reduce the amount of tax owed to less ...
  6. Child Tax Credit

    A credit given to taxpayers for each dependent child that is ...
Related Articles
  1. Personal Finance

    What's IRS Form 1040 For?

    Most U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
  2. Financial Advisor

    Tax Time is Coming; Don't Be Caught Off Guard

    It's time to think about tax returns again. The good news is that the regulations in 2016 have not changed dramatically from last year.
  3. Markets

    What Is Section 1231 Property?

    Section 1231 property is depreciable business property that’s held for a year or longer.
  4. Personal Finance

    This Explains $0 Federal Income Tax for Millions

    Understand how the earned income tax credit works and whether it applies to you.
  5. Personal Finance

    How To Get The Most Money Back On Your Tax Return

    Many people pay more taxes than they have to simply because they don’t know better. Here are a few suggestions for getting the most out of your tax return.
  6. Personal Finance

    Understanding Taxation Of Foreign Investments

    Technically, any gains from foreign investments owned by an American citizen are subject to tax by the company's home country as well as the IRS. However, the Foreign Tax Credit enables you to ...
  7. Personal Finance

    Should Married Taxpayers File Together?

    Married couples that file a joint tax return can enjoy several credits and benefits that aren’t available when filing separately.
  8. Investing

    Tax Deductions Vs. Tax Credits

    Understanding the difference between tax deductions and credits is crucial, as the tax strategies that you adopt now can favor one over the other and yield substantially different tax savings.
  9. Personal Finance

    What's an Indirect Tax?

    An indirect tax is levied on goods or services rather than on an individual or a company.
  10. Personal Finance

    Explaining Tax Returns

    A tax return is the form or forms used to file income taxes with the IRS.
RELATED FAQS
  1. What’s the difference between IRS Forms 1040 and 1040EZ?

    Though very similar, the differences between the 1040 and 1040EZ Forms are significant when it comes to filing your tax return. ... Read Answer >>
  2. I deducted my IRA contribution on my tax return but failed to transfer the funds. ...

    If an IRA contribution was deducted on a tax return, but the contribution was never made to the IRA by the taxpayer's tax ... Read Answer >>
  3. How do I sign up for the saver's tax credit?

    The saver's tax credit is a non-refundable tax credit available to eligible taxpayers in the U.S. who make contributions ... Read Answer >>
  4. How do I know whether to itemize deductions or take the standard deduction?

    Taking the standard deduction is the easiest and most common method chosen by filers, but many taxpayers may wind up paying ... Read Answer >>
  5. What is the difference between a write-off and a deduction?

    Understand the differences between a tax write-off and a tax deduction. Learn how each one works to reduce income taxes and ... Read Answer >>
  6. Do I need to file an income tax return every year?

    Understand if a person needs to file a tax return every year. Learn the benefits of filing a yearly income tax return even ... Read Answer >>
Hot Definitions
  1. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  3. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  4. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  5. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  6. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
Trading Center