It's still counted as a refund even though you didn't physically get the money.
Enter the state refund, as usual, and also enter the amount as a payment for Other Income Taxes.
To do this, please follow these steps:
- On the Deductions & Credits screen, in the Estimates and Other Taxes Paid section, click on the box next to Other Income Taxes.
- On the next screen, in the 2017 Refund Applied to 2018 section, click the box next to 2017 Refund applied to 2018 state taxes.
- Enter the state and amount on the next screen.
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