Iowa line 27. Turbotax not auto-populating the Fed tax refund from previous year

[m319]

I received a $1300 fed refund on my 2020 taxes. 

On the Iowa "step-by-step", under "Adjustments" -"Adjust Federal income",  on the screen labeled "Enter your Federal tax info"- The first line "Fed income tax refund received in 2021 for 2020"  shows $1300.

The last line, "Federal economic impact payments (stimulus payments) received in 2021" shows $1400.

The Iowa "Federal Income Tax Refund Received Worksheet" shows the $1300 amount in line A- "Federal Income Tax refund received in 2021", and shows $1400 on line G- "Federal economic impact payments"

When I view my final Iowa 1040, Line 27 "Federal income tax refund/overpayment received in 2021" is blank. 

Shouldn't the $1300 refund show here on line 27? Thanks

But when I review the final Iowa 1040, there is nothing on Iowa line 27. 

[MaryK4]

Iowa does not include the federal stimulus payments that you received as federal refunds on the state tax return so it dies not have to be included on Line 27.

See Federal Income Tax Refund / Overpayment Received in 2022.

[m319]

Thanks for that reply.

But I am questioning why it doesn't auto-populate the $1300 Federal refund I received in 2021, on Iowa line 27. 

[MaryK4]

TurboTax does not include the Federal Refund because it was the Recovery Rebate Credit (stimulus) so it is not included on Line 27 as a Federal Tax Addition and Deduction on the Iowa state tax.

@m319

[m319]

Hi Mary, thanks for helping me today. I think I hear what you are saying, but I just want to be perfectly clear.

In 2021, I received a $1400 federal stimulus check.

In 2021, I also received a $1300 federal refund- because $1300 too much was withheld from my paychecks in 2020, that I filed for tax year 2020.  

Are you saying both of these amounts ($1400 and $1300) are exempt from my Iowa state taxes?

Because every other year I have filed, Turbotax has me claiming the previous year federal refund on my Iowa taxes.  Thanks!

[MaryK4]

Thank you for your diligence and I understand your concern!  While it is true that your Iowa refund could be from your wage withholding, Iowa has said they will allow a "priority" so that the refund can be designated as stimulus BEFORE withholding to provide relief to state taxpayers.

@m319

[m319]

Hi, I had reached out to the Iowa Department of Revenue, just before I asked my question here.

I finally received their response today. It reads as follows:

"Hello Michael, your stimulus would not be reportable to Iowa. 

However, from the instructions - If you received a refund of federal income tax during 2021:
You must report the amount on this line 27. It must be reported even if you used the standard deduction on the prior year's Iowa return. The federal refund must be included on this line because you benefited from being able to deduct federal taxes on the prior year's Iowa return, which reduced your Iowa taxable income for that year. The amount reported on this line should not exceed the total amount of any federal tax deduction taken on the prior year(s) Iowa return.

Have a great day.

Sincerely,

 Russ S.

Taxpayer Services | Tax Management Division | Iowa Department of Revenue 

tax.iowa.gov | [phone number removed]"

This seems to contradict you saying "TurboTax does not include the Federal Refund because it was the Recovery Rebate Credit (stimulus) so it is not included on Line 27 as a Federal Tax Addition and Deduction on the Iowa state tax."

This leads me to believe this is a Turbotax software mistake that needs to be corrected/updated. 

I ran my taxes through 2 other software programs (OLT.com and Fileyourtaxes.com), and both of those counted my Federal Refund as taxable, while Turbotax did not.

Can you please look into this again, and have the software updated if necessary.

Thank you for all your assistance

[abemanuel]

I agree that TurboTax has a glitch.  I think your line was blank because they were taking the $1300 and subtracting $1400 in error, which left a negative amount, so it just was blank.

I have a similar issue, but received $2292 recovery rebate credit as part of the 2020 Federal refund in 2021.  I believe the $2292 should be removed from my federal refund for line 27, because it was really a "late stimulus payment".  However, TurboTax isn't subtracting the $2292 but is subtracting the $5600 rebate credit that should not be removed because it was never in my Federal Tax Refund number.

I hope someone from TurboTax looks into this issue and corrects it.  I am going to reach out to Iowa Department of Revenue to understand what number to put in the form and override.  Thank goodness for Desktop version.  

[m319]

Looks like a recent  update fixed the issue for me. Hope it fixed it for you as well.