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lienchildress
New Member

Can a tax return for state taxes generate a refund when no taxes were paid during the year?

My income solely consisted of social security and pension payments.  No state taxes were withdrawn.  Yet I'm receiving a refund of state taxes over a thousand dollars.  How can that be possible.  Can this be due to an error in the entered data?

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Accepted Solutions
ThomasM
New Member

Can a tax return for state taxes generate a refund when no taxes were paid during the year?

Yes, it's possible on both a federal tax return and a state tax return.

Assuming all the information was entered correctly, then you may be receiving what's called a "refundable credit."  This is a credit with an amount that you'll receive even if your tax owed is zero.

It stands in contrast to a "non-refundable" credit (most tax credits) which can only reduce your tax owed to zero; you then lose any excess (IRS or state won't give it to you).

To know for sure if this is your situation, you'll need to look at the state tax return.  You'll want to focus on any section or schedule that shows credits.  It may be helpful to go to your state's Dept of Revenue web site first and pull up the instructions for your state's tax return form, so you can quickly solve any confusion about what a specific line number means on the return.

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1 Reply
ThomasM
New Member

Can a tax return for state taxes generate a refund when no taxes were paid during the year?

Yes, it's possible on both a federal tax return and a state tax return.

Assuming all the information was entered correctly, then you may be receiving what's called a "refundable credit."  This is a credit with an amount that you'll receive even if your tax owed is zero.

It stands in contrast to a "non-refundable" credit (most tax credits) which can only reduce your tax owed to zero; you then lose any excess (IRS or state won't give it to you).

To know for sure if this is your situation, you'll need to look at the state tax return.  You'll want to focus on any section or schedule that shows credits.  It may be helpful to go to your state's Dept of Revenue web site first and pull up the instructions for your state's tax return form, so you can quickly solve any confusion about what a specific line number means on the return.

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