How can I deduct out a state tax refund for 2014 that was incorrectly reported in my 2015 return but I did not actually receive it until 2016?

[varkorzy]

I received a state tax refund for tax year 2014 in January 2016.  Therefore I need to report it in my 2016 return.  I accidentally already reported it in my 2015 return though.  To avoid being taxed twice on it, where and how in Turbo Tax can I take it back out?

[Zbucklyo · Accepted solution]

You need to report it on your 2016 tax return as income (assuming you itemized deductions and took a deduction for state tax paid in 2014).  Then amend your 2015 tax return, and remove the income on the amended return.  You can't handle the issue completely in your 2016 return; you must amend 2015 as well.

[TerriL]

Hi:  I'm assuming you haven't filed your Fed return yet?  If not, it's very simple to remove it by opening your 1040.  From your upper file menu, go to View.  Then choose "Forms" ; to the left, all of your return's forms will populate.  Choose Form 1040 (at the top); when it opens, scroll down to Line 10 and simply delete (or back out) the State refund amount.  There you go....now it's only in your 2015 return and not also in 2016!  Hope this helps.  Good luck!

[varkorzy]

I cannot just delete it on line 10 of the 1040.  The IRS will see that I received it in 2016, so I have to report it on line 10, but then I have to take it back out on line 21 somehow.

[TerriL]

So, what I understand is that somehow it got reported on your 2015 return....which has already been filed.  That means you did claim the income already.  I have run into these kind of situations a number of times before (where the refund is received TWO years past its tax year) and IRS only cares that the income is claimed.  It went into your 2015 return and trust me....they can and do see that.  I didn't tell you to file an amended 2015 return simply because, in my opinion, it is not necessary but it is totally up to you.  Best of luck!

[TerriL]

Hi again!  I forgot to ask if you are E-filing or paper filing.  If you are doing the latter, you can attach a small note of explanation that your refund was claimed as income in your 2015 return.  You can't attach any note in TurboTax if you are E-filing but as I mentioned above, the IRS CAN see that you claimed it on your 2015 return.