If you have a 1099-G that shows a refund for state or local taxes, you need to check if you included the state and local taxes in your deduction from income. Most people use the standard deduction, but occasionally the itemized deduction amount is higher. To determine if you used the state and local taxes as a deduction in last year's return, check the following items:
Look at your 2020 1040 line 12. Did you take the Standard Deduction or Itemize?
If you took the Standard Deduction, the 1099-G is NOT taxable, it is NOT reported.
If you Itemized, look at your 2020 Schedule A. Did you claim State Income Tax or State Sales Tax? Is Box 5a checked on the 2020 Schedule A?
If Box 5a on the Schedule A IS checked, you claimed State Sales tax (not State Income Tax) and the state refund is NOT taxable, it is NOT reported.
If Box 5a on the Schedule A IS NOT checked, you claimed State Income Tax and the state refund MAY BE taxable.
Use the amount listed on Schedule A, line 5d as total taxes paid.
If TurboTax is asking about entries for the Refund Worksheet:
Item Q line 1 is found on the previous year’s Schedule A, line 5b
Item Q line 2 is found on the previous year’s Schedule A, line 5c
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