Return of an Employee's Claim of Right Income

The adoption of the Tax Cuts and Jobs Act in 2017 has raised an issue regarding how to treat an employee’s return of an item that was erroneously received in a previous year and reported as income under the claim of right doctrine. Before discussing that issue, I will provide brief explanations of the claim of right rule, the treatment of the repayment of claim of right income, and the treatment of miscellaneous itemized deductions.