TT is taxing 2022 Colorado TABOR refund for 2023

[RW14]

My 2022 Colorado refund included $570 of "Sales Tax" (aka TABOR) refund.  My understanding this amount should not be taxed for Federal or State tax in 2023.

However TT is including the full refund amount on the "St Refund Wks" and since I itemized in '22 and will in '23, it is going to be taxed for federal and since CO starts with Federal Taxable income it will be taxed on my state return.

I think my only option is to override the carried forward refund amount so I can exclude the $570.

Am I missing something?

[BillM223 · Accepted solution]

I don't think you are missing anything.

I suspect the issue is that TurboTax can't tell on the Carryover Worksheet (that's what you're looking at, right?) that this state tax refund is not simply a regular refund that would be on 1099-G but includes a TABOR refund.

And this announcement that the TABOR refunds would not be taxable is a relatively recent development.

So I would say that changing the carryover amount may be necessary. I hope it does not impair your ability to e-file (some overrides do).

Let us know if something else comes up.

[RW14]

I'm not familiar with the "Carryover Worksheet".  I see it on the "State and Local Income Tax Refund Worksheet".  In the Step by Step section the 1099G is hard coded - eg. it carries over from the previous year. 

I don't understand why the programmers at TT can't recognize this and fix the program to allow me to enter the correct amount - instead of forcing to the amount received which includes the TABOR refund.  The really crazy part is having it taxed Federally and State.

[BillM223]

Please have some mercy on the programmers. In the last few years, the IRS and state government have been "moving the goalposts" on a weekly basis, making constant updates necessary - and more necessary - constant testing to make sure that one change does not break a dozen other things.

Most carryovers are on the Carryover Worksheet, but there could be others (like your "State and Local Income Tax Refund Worksheet").

I don't know how common this is, but if you would like us to look at this situation, please give us a token.

A token is a 7 digit number that points to a "sanitized" version of your return, i.e., all personally identifiable information is masked out.

To send us a token, please do the following:

Online

• Log into your TurboTax Online tax return
• On the left, click on Tax Tools
• Under Tax Tools, click on Tools
• In Tools Center, click on Share my File with Agent
• TurboTax will give you a “token”, a 7-digit number
• Post the token number in this thread
• Be sure to add to that post “@” “billm223” (without the space in between) so that I will be notified

Desktop

• Open your return in the desktop product
• Look along the top and click on Online
• Click on Send Tax File to Agent
• TurboTax will give you a “token”, a 7-digit number
• Post the token number in this thread
• Be sure to add to that post “@” “billm223” (without the space in between) so that I will be notified 

[RW14]

@BillM223

1210720

I do have empathy for the programmers.  Naturally I'd like to avoid paying federal and state taxes on a refund that is supposed to be tax free for both.  Probably a $100 overtax if I can't figure this out.  Not a huge amount.

I don't know that this matters for your testing, but I haven't finished my return yet.  Also, I don't know if you wanted me to override the field that I think includes the non-taxable refund.  Schedule 1 line 1 for example. 

I agree per your earlier post that the refund amount seems to originate on Federal Carryover Worksheet.  I noticed that when I try to override it on that schedule it adds a row and I have to enter a negative number to get the correct taxable refund. 

I don't know how TT would interpret that later on final review and/or electronic filling.

I also understand that it is not common problem.  I believe most taxpayers are not itemizing and I believe this problem only affects those who itemize (which I still do for '22 & '23). 

Thanks for your help.

[BillM223 · Accepted solution]

@RW14 

Go back to your Federal interview, and go to Wages & Income->1099-MISC and Other Common Income->State and Local Tax Refunds on Form 1099-G. Click on Start or Update.

The next screen should be State and Local Tax Refund Summary. There should be one entry, the tax "refund" carried over from 2022. Click on Edit.

The next screen should be "Tell us about your refund". TurboTax gives you a box for Colorado's refund. The box is filled in with the 2022 tax refund from the Carryover Worksheet.

You can adjust this amount by the 571 that is the 2022 Tabor refund. This means that you don't have to mess with the Carryover Worksheet. I did it, and your federal tax due decreased as expected, although oddly enough, the state tax due did not change.

Well, let me give you that and see what you can do with it.

[RW14]

@BillM223- thanks for your help.

I was simultaneously working on this.  I did it through overriding the carryover worksheet and got the same result you did - change to Federal and not State.  (I think the state did not change because of a CO limit on itemized deductions for my situation.)

I haven't filed yet, but it appears TT is accepting the override and not creating any errors.  So I think electronic filing will work.  Yea!!

A note for the TT programmers - CO is doing another TABOR refund with the 2023 return - so this "problem" will repeat again for 2024 returns.  I am now equipped on how to override next year.

Thank you so much for your help - and the extra $96.