There was more than one explanation shared in this thread and I am not sure what you tried. Here's another explanation of the steps for both the Federal return (to report the income) and for the New ...
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There was more than one explanation shared in this thread and I am not sure what you tried. Here's another explanation of the steps for both the Federal return (to report the income) and for the New York return (to subtract the income there).
Because the special New York Inflation Refund is not a regular tax refund but a special payment that is taxable at the Federal level, you can report it instead in Other Reportable Income. In TurboTax Online:
From the left menu, go to Federal and select the first tab, Wages & Income
Add more income by scrolling down to the last option, Less Common Income, and Show more
Scroll down to the last option, Miscellaneous Income, 1099-A, 1099-C and Start
Choose the last option, Other reportable income and Start and Yes
Enter the applicable description and amount and Continue
Then, to subtract an item of income from your New York return that was included in your Federal return income (because it's not taxable for New York), you can enter that subtraction in TurboTax Online at the screen in your New York return labeled "Changes to Federal Income". Look under Other New York Adjustments to Federal Income, and select Start next to Other changes (adjustments) to your federal income to make the subtraction entry.
You should not have a zero in total payments and withholding unless you entered a zero in a field where that will cause an error, such as may occur if you entered the payment in the state tax refund section. The "Total of all your payments and withholding" field in the state refund interview includes amounts from your W-2 (Box 17), estimated tax payments, and any extension payments from the prior tax year. This is why we are recommending that the special New York Inflation Refund NOT be entered as a tax refund.
@lwkaufman