1099-G from MA for Out of state MA tax refund and federal taxes

[purplestar777]

I live in NH and work for a company with an office in MA. However I worked mostly remote in 2023, so I was able to claim a significant refund for state taxes on my 2023FY tax return that I filed last year in 2024 - almost all of taxes that were witheld for MA state came back to me.

I recently (about a month ago or so) received 1099-G from MA revenue service showing the refund amount.

What do I do with it?

Last year when I claimed the refund, I used Online Turbotax Premier.

Was it smart enough to take care of that refund and increase my 2023 income on taxes done last year and I am all set, or do I need to manually enter this amount as 2024 income on my taxes that I am about to do in 2025?

If the latter, does it mean I might owe penalty for tax underpayment?

I did not realize that state refund might be income that I need to pay federal tax on. I thought Turbotax would reconcile it automatically and reduce my federal refund accordingly on the 2023 tax return where I claimed the state tax refund. Does it do that?

Thanks

[RobertB4444]

The only way the state tax refund is counted as income is if you itemized deductions in the prior year and took a deduction for the state taxes that you paid.  You should check your 2023 return and see if you took the standard deduction or not.  If you did then you can ignore the tax refund 1099.  If you itemized deductions then go ahead and enter it into TurboTax and the system will add it to income.

@purplestar777 

[purplestar777]

Thank you @RobertB4444 

I took standard Head of Household deduction. That means I can relax and ignore this 1099-G, correct?

[DawnC]

Correct.   If you took the standard deduction on your 2023 tax return, any state tax refund you received in 2024 would not be taxable to you.  Keep it with your tax records, but there is no need to enter it into TurboTax on your 2024 tax return.