Your state refund amount is only included with your taxable income in certain situations. If all three of the following are true, your refund counts as taxable income:
- You itemized deductions last year, instead of taking the standard deduction
- You claimed state and local income taxes (not general sales taxes)
- Claiming the deduction helped you increase your federal refund or lower your tax bill
Even when your refund is taxable, it may not be the entire amount. It depends on how much the deduction affected your refund or tax bill.
Understanding your CP2057 Notice - What you need to do:
- Read your notice carefully. It will explain the information the IRS received.
- File a Form 1040X if the information is correct.
- If you believe the information is wrong, contact the business or person reporting the information and ask them to correct it. Make sure you have copies of both 1098s from both lenders if one is missing from the IRS information. @ChristinaT321
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