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Get your taxes done using TurboTax
In trying to sort this out, I decided to try running my return through Jackson Hewitt and FreeTaxUSA and they both concluded that I do not need to include the refund in my taxable income, which is what I also think should happen when I fill in lines 27 and 30 on the "State and Local Income Tax Refund Worksheet".
More importantly, when you read page 85 of the 1040 instructions, the comment at the top of that page, it says "Before you begin: Be sure you have read the Exception in the instructions for this line to see if you can use this worksheet instead of Pub. 525 to figure if any of your refund is taxable."
I read the exception for the instructions, which are on the previous page (84), about Taxable Refunds, Credits, or Offsets of State and Local Income Taxes, which states this exception that applies to me: " Exception. See Itemized Deduction Recoveries in Pub. 525 instead of using the State and Local Income Tax Refund Worksheet in these instructions if any of the following applies.... 4. Your 2020 state and local income tax refund is more than your 2020 state and local income tax deduction minus the amount you could have deducted as your 2020 state and local general sales taxes." In this case, I shouldn't even be using the State and Local Income Tax Refund Worksheet.
So, Pub 525 has me use a Worksheet 2a and when I complete that (using the IRS's Sales Tax Deduction Calculator), and according to the Worksheet 2a, my refund is not taxable.
Somebody tell me there is a higher-up person I can talk to at TurboTax who can settle this. The general help desk wasn't even able to find these worksheets in my return, much less answer questions about them. I tried sending a Facebook message to TurboTax and that person asked for screenshots and then said to call the help desk. I called again and waited on hold for an hour and then the hold music just stopped. I paid to upgrade to get Live help, called back and spent over an hour with someone who was not able to even see these worksheets, she could only see the TurboTax screen I see. She chatted with a supervisor who gave simplistic answers and did not seem to hear the part about the exception. Supposedly, and Enrolled Agent is going to call me back in 24-48 hours. Hoping that call comes before I have to file an extension. I think if I can't get this sorted with TurboTax, then I will just delete the 1099-G and if I get audited, I have the worksheets filled out properly to show them.