topic Re: State Refund double tax in State tax filing

State Refund double tax

Bill-11 — Tue, 12 Jan 2021 23:50:25 GMT

Is it true for Arizona filers? I agree that when you receive a prior year AZ state refund (e.g. 2019) it should be reported as income for the following year (e.g. 2020). But why is the refund amount also reported as 2020 AZ state income? I notice this when viewing the TT Form 1040 and 140 details. This appears to be paying (additional) state income taxes on the prior-year overpaid taxes which were refunded.

Would appreciate an answer this question.

Re: State Refund double tax

ThomasM125 — Sat, 16 Jan 2021 00:33:42 GMT

Oddly enough, in Arizona you can deduct your state income tax paid in the current year that you also deducted on your federal return. So, you need to add that back if you get a refund in the following year to the extent you got a deduction for it in the previous year.

Re: State Refund double tax

Bill-11 — Sat, 16 Jan 2021 00:51:59 GMT

Hi ThomasM125,

Thanks for your answer. But I'm still confused.

I paid TOO MUCH state taxes in 2019, hence I received a refund for my over-payment. Why must I report my over-payment as income in 2020? I can't find an answer online via GOOGLE search. I didn't get a clear answer to my question from your email reply.

Hoping you can further explain for me.

Thanks,

Bill

Re: State Refund double tax

TomD8 — Sat, 16 Jan 2021 15:42:31 GMT

If you itemized deductions on your 2019 federal return, and you deducted your state income taxes, any state tax refund would be considered taxable income on your 2020 federal - but not on your state - return.

AZ tax refunds are reported on Form 1099-G. Be sure to enter your 1099-G in the proper section of TT. Once your 1099-G is available, you can obtain it online as described here:

https://azdor.gov/news-events-notices/news/form-1099-g-tax-information-available-online-taxpayers

Re: State Refund double tax

Bill-11 — Tue, 19 Jan 2021 00:06:15 GMT

Hi,

I appreciate the responses I've received, but they still appear inaccurate. You haven't answered my Turbo Tax question regarding additional payment of Arizona State tax on my State Tax Refund from prior year.

In Turbo Tax, when I look at my State 140 Form, I observe it copies the AGI directly from Federal 1040 form. The AGI total includes my prior year State Refund as added income. I would expect this on both Federal, but not also on my State form 140. As a result, I'm now going to pay additional state income taxes, on my state tax over-payment from the prior year. This doesn't make sense.

I'm hopeful someone can explain to me in sufficient detail.

Thanks,

Bill