I received state refund checks in 2020 for both the 2019 tax year and 2018 tax year, because I submitted my 2018 tax returns in October of 2019 and the money didn't show up until January 2020.
Turbotax automatically pulled in the amount for 2019 in the State and Local Tax Refund Summary section under Personal Income because I used Turbotax in 2019.
I manually added the second refund I received for tax year 2018 in the "Add Another State or Local Tax Refund" button.
For the 2019 entry, it goes through a series of questions to qualify whether the refund check is taxable. For 2018, it does not offer those questions and simply counts it as taxable income in my final personal income summary page.
As far as I know, it should not be taxable because it's just a return for overpayment from my 2018 returns, a year in which I took the standard deduction. I took the standard deduction in both 2018 and 2019, yet the 2018 state refund shows up as taxable income for 2020.
How do I resolve this? I could simply delete the entry under State and Local Tax Refund Summary, but I technically did get that refund in 2020, and doesn't fee right. I'm assuming the IRS gets notices for that as well. I should be able to report that I received this money, and that it's not taxable because it's just me getting my overpayment funds back. I tend to overpay every year when filing an extension because I do not want penalties.
