Are you sure you're looking at the interest and not the tax refund? On a standard IRS Form 1099-G a state income tax refund would be in box 2. But your Department of Taxation might be doing something nonstandard on their combined 1099-G and 1099-INT. Maybe they made up their own form and didn't follow IRS rules. In any case, enter the interest income in box 1 of the 1099-INT, even if you have a nonstandard form that uses a different box number.
