Mike9241, thank you for the info. Correct, I itemized in both years and used state income tax in both years.
I am using desktop version of TT on windows. I can see the "state and local income tax refund worksheet" (I'll call this the "TT refund worksheet") as well as the "state and local tax deduction worksheet" and the "tax payments worksheet". These correctly reflect that I paid $1000 of 2022 extension payments and received $1061 of refunds reflected on forms 1099G. The TT refund worksheet also correctly reflects that I had a total of $663 of SALT payments in 2022 that were in excess of the $10K SALT limitation. (And for 2023 I am again in excess of the $10K SALT limitation.)
Pub 525 worksheet 2a explains the calculation that is reflected in part III of the TT refund worksheet. I don't have any concerns with the actual calculation. My question is about the inputs to that pub 525 worksheet 2a. Pub 525 says (at p.25) the following: "Recovery and expense in same year. If the refund or other recovery and the expense occur in the same year, the recovery reduces the deduction or credit and isn't reported as income."
This rule, as stated in pub 525, makes practical sense: the fact that I voluntarily made a large overpayment, and received a refund, instead of making no payment and receiving a smaller refund, shouldn't matter. The two should net out against each other before making the worksheet 2a calculation. It appears to me that the TT refund worksheet, Part I, column g is intended to implement this rule by offsetting the refund received in 2023 against the extension payments made in 2023.
However, for some reason, which TT does not appear to explain, column g is only offseting $50 of my $1061 refund, resulting in a refund of $1011 which then becomes the input to the pub 525 worksheet 2a calculation. My question is why is TT only offsetting this seemingly arbitary $50 amount, instead of fully offsetting the entire $1000 of extension payments against the $1061 of refunds received?
