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marie2023
New Member

Refund of local income tax in 2023 for 2020

Good afternoon, My employer withhold local income taxes during a portion of CY2020 which was inappropriate.  I received a refund through their taxing entity and a 1099-G in CY2023 indicating the amount of the refund and 2020 in box 3.  I also had a refund from the State of PA in 2023 due to overpayment of 2022 state taxes. Turbo Tax (Deluxe) asked whether I itemized in 2022 for the PA refund but did not ask about 2020 and is calculating tax as if this was taxable income in 2023.  I did not itemize in 2022 or 2020 so these refunds should both not be taxable.  How does one work around this?  I am concerned that not reporting, as others have suggested, is not appropriate - non taxable does not equate to non reportable does it? Thanks!

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4 Replies

Refund of local income tax in 2023 for 2020

If you did not itemize for those years just leave them off.  You don't need to even enter them.  Delete them.  

marie2023
New Member

Refund of local income tax in 2023 for 2020

Thank you for your prompt response, concern remains that non taxable does not equate to non reportable as the 1099-G was sent to the IRS.  Other thoughts?

Refund of local income tax in 2023 for 2020

IRS pub 525.  See page 25 example 29.......

https://www.irs.gov/pub/irs-pdf/p525.pdf

 

You claimed the standard deduction on your 2022 federal income tax return.  In 2023,you received a refund of your 2022 state income tax. Don’t report any of the refund as income because you didn't itemize deductions for 2022.

marie2023
New Member

Refund of local income tax in 2023 for 2020

Thank you, greatly appreciate the citation and referenced example.

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