Why is the amount TurboTax populated for last year's state refund lower than the actual refund amount?

[GottaPayMyTaxes]

In the "Tell us about your refund" section, TT populated an amount for my 2016 state refund that was lower than the state refund I actually received.

The amount that I actually received (I double checked my bank statement) matched what TT had told me last year I'd receive from the state for my 2016 return. That's why I was especially surprised (and concerned!) that TT populated a lower amount when preparing the 2017 return.

Shouldn't TT populate what it knows to be the state refund amount from 2016, since I used TT to prepare my 2016 fed and state returns?

For now, I replaced the amount TT populated with the amount I actually received back from the state.

Is that the proper thing to do?

Thanks!

[SteamTrain]

Maybe not

That can happen in certain situations (a lower amount on line 10 of the form 1040).  IF the itemized deductions that were used in the prior year were close to the Std Deduction that you could-have used in 2016, then the amount of refunded state taxes that show up should only be the amount required to take you down to the Std Deduction level for that year.

Example: say you filed MFJ in 2016, and had $13,000 of itemized deductions, including maybe 3,000 state income taxes paid as a part of those itemized deductions...….and you then received a $900 state 2016 refund, after filing in 2017.    Since the Std Ded for a MFJ tax return (under age 65) was 12,600 for 2016 taxes ….only $400 of that $900 should show up on line 10 of the 2017 form 1040.   i.e. just the amount that would bring the 13,000 itemized, down to the 12,600 Std Ded. for a MFJ couple.

The tax software does this calculation, as long as all the proper income and deduction $$ carried into 2017 from your 2016 file (Or you entered the 2016 $$ correctly during the interview if you didn't have a 2016 tax file to transfer into your 2017 file)

[GottaPayMyTaxes]

Thank you for this. The scenario you describe does not seem to be the situation for me in 2016/2017 (my itemized deductions from charity and mortgage and property tax are significantly more, I believe, than my std deduction as HoH). However, is there a downside to inputting a HIGHER state refund amount, since I will be paying fed tax on that refund? Will it cause me to pay less on my NY STATE return, which would be a red flag for the state tax authority?

[rjs · Accepted solution]

Sometimes the state refund you received includes amounts that are not really refunds of state income tax, and are therefore not reported as income on your federal tax return the following year. For New York specifically, such amounts include "certain refundable credits, such as the empire state child credit, real property tax credit, earned income credit, child and dependent care credit, farmer’s school tax credit, and the New York City school tax credit," and also interest paid by New York State on an overpayment. If you got any of those credits on your 2016 New York return, that probably explains the difference in the refund amount.

The amount that you see "populated" on the TurboTax entry screen is the total refund, after subtracting the credits listed above, but before the calculation of the taxable amount that is affected by your other deductions, etc. The amount that is entered in TurboTax should match the amount on your Form 1099-G from the state. You can access your Form 1099-G at the following link on the New York State Department of Taxation and Finance web site.

https://www.tax.ny.gov/pit/file/1099g.htm

Whatever amount you enter in your federal tax return, it will not affect your state tax return because the state refund is not included in your New York income. It gets subtracted out on the New York return.

[GottaPayMyTaxes]

Thank you!  The 1009G does show that the original value in TT was correct! I will now need to update TT and redo all the checkouts :(

[GottaPayMyTaxes]

Sorry - one follow up question on this. On the same "Tell us about your refund" page in TT where it says "Total of all your payments and withholding" TT had populated a lower amount than what I saw on line 76 of my 2016 NY state return for "Total payments." I actually now see that on my W2 Schedule A, line 5a, it shows the amount TT had populated. I assume that I need to put back the amount that had been populated in TT, rather than what I see on line 76 of my state return?

[rjs]

Yes, use the amount that TurboTax had put in. Line 76 of Form IT-201 includes refundable credits. The refundable credits are treated the same as payments on the New York return, but they are not amounts that you actually paid or had withheld.

I believe the "Total of all your payments and withholding" should be the sum of lines 72 through 75 on your IT-201, but I'm not certain about that. In any case, put back the amount that TurboTax had entered there.

[GottaPayMyTaxes]

Thank you once again for your help