Received 1099-G...Confused...

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Received 1099-G...Confused...

Postby crowd79 » Fri Feb 01, 2013 5:50 pm

I received a surprise postcard in my mailbox from the state showing I received a refund last year of $xxx.xx & claiming that it may be taxable to the IRS as income if I itemized last year. However I did not itemize, so do I not have to report this at all?
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Re: Received 1099-G...Confused...

Postby sesq » Fri Feb 01, 2013 6:09 pm

Correct. If you did not deduct it last year, you just ignore it this year.
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Re: Received 1099-G...Confused...

Postby Default User BR » Sat Feb 02, 2013 12:36 pm

crowd79 wrote:I received a surprise postcard in my mailbox from the state showing I received a refund last year of $xxx.xx & claiming that it may be taxable to the IRS as income if I itemized last year. However I did not itemize, so do I not have to report this at all?

If you itemize your deductions, then state and local income taxes are deductible. You could either deduct the amount owed (which can be difficult if your relies on information from your federal return), or the amount withheld. If the latter, and you ended up getting a refund, then you had too much of a deduction. To make up for that, you have to add it to your taxable income the next year.

As you didn't itemize, then it doesn't matter to you.


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Re: Received 1099-G...Confused...

Postby Sidney » Sat Feb 02, 2013 12:39 pm

To make up for that, you may have to add it to your taxable income the next year.
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Re: Received 1099-G...Confused...

Postby mikep » Sat Feb 02, 2013 4:57 pm

Default User BR wrote:
crowd79 wrote:I received a surprise postcard in my mailbox from the state showing I received a refund last year of $xxx.xx & claiming that it may be taxable to the IRS as income if I itemized last year. However I did not itemize, so do I not have to report this at all?

If you itemize your deductions, then state and local income taxes are deductible. You could either deduct the amount owed (which can be difficult if your relies on information from your federal return), or the amount withheld. If the latter, and you ended up getting a refund, then you had too much of a deduction. To make up for that, you have to add it to your taxable income the next year.

As you didn't itemize, then it doesn't matter to you.


Brian


Schedule A instructions say you have to deduct the amount withheld during the year and you can't reduce your deduction by the amount of the refund. This is sort of double taxation as refunds go above the line impacting AGI based credits the following year.
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Re: Received 1099-G...Confused...

Postby sscritic » Sat Feb 02, 2013 5:06 pm

Here is what you can deduct on your 2012 federal taxes in terms of state and local income taxes. What you could deduct in 2011 would have been the same.
If you elect to deduct state and local income taxes, you must check box a line 5. Include on this line the state and local income taxes listed below.

State and local income taxes withheld from your salary during 2012. Your Form(s) W-2 will show these amounts. Forms W-2G, 1099-G, 1099-R, and 1099-MISC may also show state and local income taxes withheld.

State and local income taxes paid in 2012 for a prior year, such as taxes paid with your 2011 state or local income tax return. Do not include penalties or interest.

State and local estimated tax payments made during 2012, including any part of a prior year refund that you chose to have credited to your 2012 state or local income taxes.

Mandatory contributions you made to the California, New Jersey, or New York Nonoccupational Disability Benefit Fund, Rhode Island Temporary Disability Benefit Fund, or Washington State Supplemental Workmen's Compensation Fund.

Mandatory contributions to the Alaska, California, New Jersey, or Pennsylvania state unemployment fund.

Mandatory contributions to state family leave programs, such as the New Jersey Family Leave Insurance (FLI) program and the California Paid Family Leave program.

Do not reduce your deduction by any: State or local income tax refund or
credit you expect to receive for 2012, or Refund of, or credit for, prior year state and local income taxes you actually received in 2012. Instead, see the instructions for Form 1040, line 10.
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Re: Received 1099-G...Confused...

Postby damjam » Sat Feb 02, 2013 11:56 pm

For those who took itemized deductions last year and then received a refund, also keep in mind that if you paid AMT last year you may need to only include part (or none) of the amount shown on 1099-G. See IRS Publication 525, the topic is Itemized Deduction Recoveries page 23. Don't assume your tax software will get this right. I fell into this last year and the software I was using got it wrong.
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Re: Received 1099-G...Confused...

Postby livesoft » Sun Feb 03, 2013 12:17 am

It is not just that you Itemized on Schedule A, but that you also took the deduction for state income taxes. For example, I live in a state with no state income taxes, so I took a Sales Tax deduction one year. I also paid a small amount of state income taxes to another state as a non-resident. I did get a refund of some of those state income taxes and thus got a 1099-G. But as already noted, since I did not deduct state income taxes on my Schedule A where I itemized, I did not have to report the [previously taxed] refund that showed up on the 1099-G the following year.
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