NYS Inflation Refund Check- Federal Completed, But the Final Check Stuck on "State Tax Refund Worksheet, Payments and Withholding"

[philherz]

OK, I'm having a problem with the New York State Inflation Refund. As I've read in postings here, I've basically followed this suggestion:

The 2025 NYS Inflation Refund ($200/$400) is treated as a 2023 state tax refund, generally reported on your federal return under Wages & Income > State and Local Tax Refunds (1099-G). If you took the standard deduction for 2023 (which I did), this check is likely not federally taxable, so select "No" when asked if it is taxable.

Unfortunately, when my federal taxes are completed and TurboTax Home and Business does it's final check, it goes to the State Tax Refund Worksheet, Payments and Withholding. I enter $479 Payments and Withholding.  (My refund was $400)

I've tried both Yes and No when it asks "Use this worksheet to compute taxable refund amount", but it still wants me to correct this State Tax Refund Worksheet to complete my federal return when I'm done. No matter what I try, it keeps saying I have this single error.

I have no idea what's wrong or what to do. I could:

1) Not list the $400 Inflation Refund and hope for the best (I wasn't issued a 1099-G)

2) Try to enter it as a refund on my 2024 taxes instead of 2023

Any suggestions??? Thanks

[MonikaK1 · Accepted solution]

Here are the updated steps I have been providing to report the special New York refund for 2025 so that it is taxable on the Federal return and not on the New York return:

It happens from time to time that a state will issue a payment to help its taxpayers that is not taxable to that state, but taxable on the Federal return.  For 2025, the special New York taxpayer assistance payment is nontaxable to New York but taxable on the Federal return. 

Because the special New York Inflation Refund is not actually a "refund" of New York taxes paid, but a special payment to help New York residents that is taxable at the Federal level, you can report it instead in Other Reportable Income. In TurboTax Online:

• From the left menu, go to Federal and select the first tab, Wages & Income
• Add more income by scrolling down to the last option, Less Common Income, and Show more
• Scroll down to the last option, Miscellaneous Income, 1099-A, 1099-C and Start
• Choose the last option, Other reportable income and Start and Yes
• Enter the applicable description and amount and Continue
   

However, regardless of where you entered the payment as income on the Federal return, you will need to subtract it from New York income because the New York return doesn't have a feature that would automatically subtract this payment.

When you go through the questions in the New York return in TurboTax. you will get to a section "Other changes (adjustments) to your federal income". 

If you go through that section, you will eventually get to a screen titled "Enter any other subtractions" with a list of items from which to choose  (different versions of TurboTax may have the screens organized differently). One of the items on that list is "Taxable refunds (not included in line 4 of IT-201/IT-203)". You can enter the New York Inflation Refund amount you received and reported on the Federal return in the Federal column, and enter "0" in the New York column. This will allow TurboTax to subtract the amount from the New York return.

@philherz 
 

[philherz]

Thanks...Works great, except you say: "...One of the items on that list is "Taxable refunds (not included in line 4 of IT-201/IT-203)". You can enter the New York Inflation Refund amount you received and reported on the Federal return in the Federal column, and enter "0" in the New York column..."

Unfortunately, on my TurboTax Home and Business, there is no NY column, so I added the $400 under: Other changes to your federal income > Enter other subtractions > Taxable refunds (Not included in line 4 of IT-201/IT-203).

I assume this is the $400 that I show on IT-225 > Total Subtractions, right?

Thanks for your help!!!

[LindaS5247]

Yes, you are correct. That is the $400 that you show on Form IT-225, Total Subtractions.

Please return to Community if you have any additional information or questions. We would be happy to help.