I am not sure I follow,
would you please clarify.
Are you asking how you claim a city and/or county tax refund (as income) on your Federal 1040?
If so, you only need to report the 1099-G if you Itemized Deductions on your 2020 Federal return.
Kentucky and Indiana have a "Reciprocal Agreement" between them, so you should only be paying state tax to the state in which you live. City and County tax doesn't apply since the agreement is only between the states. You still need to pay city and county tax.
I assume county tax is withheld from your pay. You can file a county tax return to try to get some of that tax refunded. If I understand you correctly, you are reporting that as income on your state return? You don't need to report that as income on your state return, you never claimed it as a credit or deduction, it is just a return of your money. You were already tax on your income BEFORE the county tax was withheld. You don't want to pay tax on what you get returned to you.
Indiana should not give you a credit for the county tax you paid, they only give credit for other STATE tax paid.
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