topic State refunds for 2019 & 2016 on 1099-G causes reduction in Schedule A deductions. Why? in Get your taxes done using TurboTax

State refunds for 2019 & 2016 on 1099-G causes reduction in Schedule A deductions. Why?

ArchesNationalPark — Tue, 09 Mar 2021 00:56:09 GMT

Got a 1099G for state tax refunds for 2019 and 2016. Entered separately. Since we itemized both yrs, these are apparently taxable, but why does it reduce Sch A deduction for 2020? (Note that we did pay $1000 w our tax extension for 2019.) TT says:
"Because you pd part of you 2019 taxes, in 2020, we will reduce your state tax itemized deduction on Schedule A, Line 5 by $514."

We also sent a payment w our 2016 extension, but it didn't ask about that.

Thanks for any help.

Re: State refunds for 2019 & 2016 on 1099-G causes reduction in Schedule A deductions. Why?

MaryM428 — Tue, 09 Mar 2021 03:23:09 GMT

Your state or local tax refund received in 2020 counts as income if you itemized your deductions in 2019.

Your 2016 state tax refund would apply to your 2017 tax return. You will not report it on 2020 taxes.

The IRS is basically preventing double-dipping. You can't claim a deduction for your state income taxes, then later receive a tax-free refund of that same money as well. You must effectively adjust the amount of your refund to account for the deduction you previously claimed.

Re: State refunds for 2019 & 2016 on 1099-G causes reduction in Schedule A deductions. Why?

VClark2 — Tue, 09 Mar 2021 16:22:04 GMT

Well I received the third stimulus check if I was able to file for the past two on his current taxes I got approved and I did receive the past two summers checks I’m just wondering will I be able to receive the third one

Re: State refunds for 2019 & 2016 on 1099-G causes reduction in Schedule A deductions. Why?

JamesG1 — Tue, 09 Mar 2021 16:38:01 GMT

@VClark2

We do not have specific information on the income qualifications or procedures for the tax changes including a third stimulus payment because the measure has not been passed yet. See here for the most current information on the American Rescue Plan.

IRS information updates can be found here. TurboTax information updates can be found here.

Re: State refunds for 2019 & 2016 on 1099-G causes reduction in Schedule A deductions. Why?

ArchesNationalPark — Wed, 10 Mar 2021 16:56:19 GMT

I understand that the refunds are taxable bc we itemized and about double dipping, but I don't understand what this message from TT means or why it's doing this: "Because you paid part of you 2019 taxes, in 2020, we will reduce your state tax itemized deduction on Schedule A, Line 5 by $514."

Also, TT is prompting me to enter tax refunds from earlier years that are separately listed on the same 1099-G as the one for 2019 . . . so do I still need to amend 2017 for a $299 refund? Or can I include on 2019?

Thanks for any help

Re: State refunds for 2019 & 2016 on 1099-G causes reduction in Schedule A deductions. Why?

MaryM428 — Thu, 11 Mar 2021 01:43:27 GMT

@ArchesNationalPark

If you want to send a diagnostic copy of your tax return we will review the entries for you.

If using Online, sign in with a browser and go to Tax Tools, Tools, Share My File with Agent

If using Desktop, Go to Online and Send File to Agent

Post the diagnostic code.