Previous year's state tax garnishment and subsequent refund

[tessfam4]

I was late in filing for a NR state return for 2020. In 2025, that state garnished what it estimated I owed when I redeemed some federal t-bonds. After I competed the state return, I was refunded more than what was garnished.  I'm not sure where to report the amount garnished - do I enter it as a schedule A deduction (I am itemizing) OR do I enter it as part of the 1099-G screen for payments and withholdings? The help icon for that field isn't working/helpful.

[MonikaK1]

In the Payments and Withholdings field in the state tax refund screen, enter all of the payments you made for 2020 including the portion of the amount garnished that represented taxes paid. Do not include any interest or penalty that was part of the amount paid. That way, you won't be taxed for the part of the refund you received that was an overpayment of taxes.

The information at the "?" next to Payments and Withholdings reads:

Add up any payments you made to your state or locality, along with any state or locality withholdings from the previous tax year, including:

- Amounts withheld on your W-2, W-2G, and 1099
- Estimated tax payments for 2024 (including any paid in 2025 for 2024 - it's common for the fourth quarterly payment to be made in January)
- Overpayment from 2023 applied toward your 2024 return
- Payments made with an extension of time to file
- Refundable credits

You can find most of this info on your 2024 state tax return. Do not include balance due payments made with (or after) filing a return.

Enter the total amount of all of these combined here.
 

[tessfam4]

I have now done this, but it seems I'm still being taxed on the entire amount refunded unless I also enter the amount I paid (the amount garnished) in Schedule A (Estimates and Other Taxes Paid  > Other Income Taxes > Payments for 2022 or a prior year state or local income taxes paid in 2024.

Would this be correct? 

I think the odd thing here is that the taxes for the prior year (2020) were paid AND refunded in the same 2025 calendar year, whereas "normally" taxes are paid in one calendar year, refunded the next.

[DaveF1006]

Yes, this is correct. When the state garnished your funds in 2025, you effectively "paid" state income tax in 2025 (even though it was for a 2020 debt). Because you are itemizing, that payment is a deductible tax on your 2025 Schedule A.