To clarify, did you itemize your deductions in 2023? f you took the Standard Deduction in 2023, the "Taxable Amount (if Different)" on that worksheet should be $0. Even if the "Refund Amount Received" is $400, the taxable portion is zero because you never deducted the state taxes in the first place. Now do the following.
- Set "Taxable Amount (if Different)" to $0 (assuming you took the standard deduction in 2023). This solves your worry about paying tax on it.
- Adjust "Total Payments" to include both your withholding ($516) AND the amount you paid when you filed ($1,889), totaling $2,405.
- Ensure the "Refund Tax Year" is correctly set to 2023.
@jengakatz
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