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.