NY 2018 Refund Credited to income in IL - Software Error??

[Gary24]

I noticed on my IL state forms my prior year refund from NY State (2018 tax withheld refunded during 2019) was subtracted from my Federal AGI via IL form 1040 base income step 3 line 7. But... my 2019 Fed income doesn't include the refund amount because my Fed deduction in 2018 was the standard deduction, i.e. not itemized. So, while I don't want to unnecessarily increase my IL tax liability, it appears the Turbo Tax software is making a mistake by subtracting an amount that isn't originally included in my Fed AGI. The software knows I did not itemize deductions last year so should be ignoring state income tax refunds this year, no?  Or... I am thinking about this incorrectly or have made some sort of error. 

The schedule M documentation indicates an offset for line 6 (Illinois refund) but it appears the figure is being pulled off line 7 (other state refund). I believe this is an error in the TurboTax software. The help shows:

     Schedule M : Line 25-Recovery Item

     From federal Form 1040, Schedule 1, line 1, plus federal Other Income Statement, line 10b, minus            Illinois Form IL-1040, line 6.

Any advice regarding is appreciated. Happy to clarify further as needed.

[ThomasM125]

I suggest you look on your federal form 1040 to verify that the state tax refund is not showing as taxable. You can view your form 1040 and schedules 1 to 3 while working in TurboTax as follows:

1. Find the "Tax Tools" option on your left menu bar and click on it

2. Click on "Tools"

3. Click on "View Tax Summary"

4. On the left menu bar see the option "Preview my 1040" and click on it to view form 1040 and schedule 1 to 3

The state refund would show up on schedule 1, line 1 if it is included in your federal income.

If the refund does not show on your federal tax return, it sounds like it is listed incorrectly on your state tax return. If so, I suggest you contact TurboTax so they can have a look at your return in order to provide an explanation and resolution to your problem as follows:

https://ttlc.intuit.com/community/using-turbotax/help/what-is-the-turbotax-phone-number/00/25632