Should I file this 1099-G on my federal return? It incorrectly shows I received a state refund last year.

[Aquarius5]

I received what I believe is an incorrect 1099-G for Massachusetts. It indicated I received a state refund of $344 because last year when I filed my return I initially received a refund of $344. However, I later amended/corrected my state return and found that I actually owed $59. So I ended up writing a check back to the state for $403 ($344 refund paid back + $59 owed). 

So my question is, do I still need to include this 1099-G in my federal return, pay federal taxes on the $344, even though I did not really end up with the refund listed on it?

[KenH1]

You have two options:

1) Include the 1099-G for $344, but then claim $403 as a state tax deduction.

2) Ignore the 1099-G and claim a $59 state tax deduction.

To enter state taxes paid in 2016 (not including W2 and 1099 withholdings, which are already accounted for): 

Click Federal Taxes (top menu)

Click Deductions & Credits (just below top menu)

Scroll down to Estimates and Other Taxes Paid and click Show More

Click Start next to Other Income Taxes

[Aquarius5]

Why would I get to claim a $59 state tax deduction for 2016? The $59 state tax was what I ended up owing for 2015 once I amended my 2015 return.

[BobB7]

He meant show $59 as taxable on your 2016 return. My comment was not a logical explanation.

[Aquarius5]

Why would $59 be taxable on my 2016 return? These numbers should only apply towards 2015 right?

[BobB7]

You're correct, sorry

[KenH1]

No problem Bob, I'm wrong at least once a day.  To follow up with the original comment:  state taxes paid are an itemized deduction, and thus any refunds are taxable.  So the NET amount paid to the state is a deduction.  Either option is OK since they net to $59