My state adjusted a refund for a prior year (2016), resulting in a State Tax Refund 1099-G this year for a prior year (2016). Turbo tax is treating this as income. I did itemize in 2016, but took state sales tax deduction instead of state income tax (because of AMT, it didn't make a difference). As such, I shouldn't have to pay Federal Tax on the State Refund. On the State and Local Tax Refund Worksheet, Part VII, the refund for prior year shows up, and column D (Taxable Amount) is the refund amount. How do I indicate that in 2016 I used Sales Tax and therefore this should be zero?
