How do Oklahoma tax filers enter a 1099-G specifically related to the Parental Choice Tax Credit in the federal portion of "Wages & Income" in Turbotax?

[jayohdee]

Within Turbotax, Box 2 in the 1099-G section is listed as a "Business or Farm Refund" whereas the Parental Choice Tax Credit is a state tax credit for private or home school tuition.

[Anonymous]

Since The Parental Choice Tax Credit is a refundable credit, it is considered a state income or local tax refund, and will be reported under Refunds received for state/local tax returns. 

Follow the instructions bellow to report your 1099-G:

TurboTax Online

• From the Tax Home, select Income, and then +add income at the bottom. 
• Locate the Other Common Income section, and select the first option for Refunds received for state/local tax returns

TurboTax Desktop

• From the Federal Taxes tab, select Wages and income
• Locate the 1099-MISC and Other Common Income tab and select State and Local Tax Refunds on Form 1099-G

[jayohdee]

If this is the case then there is an additional problem.

On Turbotax online you must chose the tax year of the refund where 2023 is the latest option.

However Oklahomans received the tax credit in 2024.

[ThomasM125]

The Parental Choice Tax Credit is really just a grant issued by the state, as it does not have a direct relation to your state income tax liability. As such, you should report it in the 1099-MISC section as mentioned by @Anonymous . You should then choose the Taxable Grant option on the screen that says What Type of Payment Did You Receive? 

[matt22-21]

I am running into the same issue as joduser.  I'm using TurboTax Online.

I think the solution is entering under the "Other 1099-G income" section and clicking the "taxable grant" section.  From here, I'm putting the taxable grant amount in Box 6 which says "Taxable Grants", even though my 1099-G has this amount in Box 2.  There's a note below that says: "Note: Your version of the 1099-G might have different box numbers than what are shown here. If your state's box numbers don't match ours, make sure you enter the correct info above."

I would appreciate if someone could confirm that I'm doing this right.  This is the first year of the Oklahoma Parental Choice Tax Credit and so it must be new to TurboTax, because this current setup is not very intuitive.

Also, does this mean that this tax credit is taxable income federally?  I found this online (dated 5/15/24): "The PCTC will not constitute taxable income. At this time, a 1099 is going to be issued and it could affect your federal income tax. "

[jayohdee]

@matt22-21I'm going to hold off until I have more information, but I'm reasonably sure it's not a taxable grant. I think the box entry values are more important than the description of each box. And because this is a Box 2 entry on the 1099-G I'll be making my entry there.

That just leaves my original question unanswered. Do I assume that "Business or Farm Refund" is an incorrect description from TurboTax or do I include it as part of my 2023 OK tax refund which makes the year incorrect?

[AmyC]

No. The OK government clearly defines this as a state tax credit refund. The taxability is determined by individual circumstances. See Title 710 Chapter 50-15-119 Parental Choice Tax Credit. This is new and there will undoubtedly be lawsuits to determine boundaries.  The latest state legislation, Oklahoma Parental Choice Tax Credit Legislation shows it is not taxable to OK.

I see two ways to treat this: 

1. As a state refund -  may or may not be taxable depending upon itemization in prior year.

2. As a taxable grant. - the safest method, pay federal tax Enter in box 6 as a taxable grant

The second option seems the most reasonable to survive this without audits or backlash. New laws are often made without thinking through all the possible effects.

[jayohdee · Accepted solution]

Linking to this thread as it supplies the best answer.

https://ttlc.intuit.com/community/taxes/discussion/1099-g-for-2024-can-t-be-entered/00/3424675?relat...

[Grace55]

Has anyone accurately answered this or found a solution?
1099 for the parentalchoice tax credit cannot be entered in TurboTax because it should be listed under credit and tax year 2024 is not an option.

It should not be listed under tax grant or any of the other 1099G options because those are taxed.  it would cause a reduction in refund/a higher tax burden.

It would make more sense if the tax year read as 2022, since 2022 was the tax year utilized for qualification review of whether or not you qualified for the tax credit. It should be recorded on the 2024 taxes, but it seems that the tax year in Box too should have said 2022. If you receive a state refund for overpaid taxes, you would notice that in tax year it shows 2023 but at the top it shows 2024. I’ve yet to find a solid answer, even after paying for the upgraded services. I would love to know if someone has something that is accurate and not just a work around solution.

[jayohdee]

@Grace55Because I chose not to itemize my deductions for this year's tax (2024) return, I was able to disregard the 1099-G amount as stated on the form itself.

My understanding is if you do itemize your deductions this year, then the amount received in Box 2 will be reported on next year's tax preparation as a state refund amount.

In other words say you receive a $100 refund from the State of OK this tax season (2024 return), you will report that as normal next year when preparing your 2025 tax returns plus whatever amount you received for the Parental Choice Tax Credit.

If you got the full PCTC amount of $7,500 then in my hypothetical scenario you would report a $7,600 ($7,500 + $100) state refund on next year's tax return.

[Grace55]

Thank you. This is how I see this best also. I am itemizing this year and therefore all of the confusion for me. 

so even though the 1099-G shows year 2024 in the top, since it’s for tax year 2024, I would file with my 2025 taxes and claim as a refund for 2024 (since I’m itemizing 2024)? 

it’s made even more confusing because there is an option in the Oklahoma state tax form, when filing for 2025, where it asks how much of the refund listed in the federal portion was from the parental tax credit which led me to believe the state expects us to report it in our 2024 return since it wasn’t even available in 2023 or before. 

[jayohdee]

Completely agree with the confusion especially around the State portion of the tax prep.

To answer your question, my understanding is yes, you will report the amount next year.

If you get a refund from the State of OK for this tax season, you should get a second 1099-G stating that amount. It will also have 2024 on as the year because--confusingly-- you would get it for the 2024 return, but report it on your 2025 taxes. This is why TurboTax will always ask you about whatever State refund you got from the previous year when doing your current year's taxes.

[Grace55]

You’ve definitely been helpful. Just not sure it’s still correct since we received the credit in 2024, I still believe it’s supposed to be filed with the 2024 return. 

I feel like I’m going in circles and not trying to be obstinate or obtuse. 

the regular refund from overpayment is filed in the year of the refund for the tax year it is applied to. My 2023 state overpayment refund was paid/refunded in 2024 after I filed my taxes. So the form says 2024 at the top and 2023 in box 2. But with  the PC tax refund having 2024 at the top ( and being paid out in 2024) I don’t think waiting to apply it with the 2025 return is the legal option. 

you’ve been kind in your responses. I’m really just trying to make it make sense. I’ve emailed the OTC without a response and called the OTC where they told me it was to be filed with the 2024 return. I’ve called the commissioner and am waiting on a call back (not holding my breath). But that’s why I’ve come here—so to see if anyone has spoken to an accountant or otc agent who has thought about this logically and made it make sense! 

[jayohdee]

I can definitely appreciate the confusion. And I'm certainly not a tax expert so you're right not to take anything I say as certain. Maybe hiring a tax accountant this year may be the best way to go for you...

I would be interested in anything you've learned in the future if you think to respond to this thread.