State Tax Paid in 2023 for 2022 Extension - This is applied for 2023 payments by Turbo Tax. IS this correct?

[gunkiran1]

Turbo Tax asked the question - 

"How much of your 2022 state taxes did you pay in 2023?

Enter the 2022 state taxes you paid in 2023 with your extension of time to file your 2022 state return. "

I live in Massachusetts. I paid $10,000 with this extension.  for 2022 State I had a refund but that refund was calculated based on this payment. 

Why is Turbo Tax asking this question and adding this payment to my 2023 State Tax Payments  and giving me a credit?  This doesn't feel right so appreciate any expert help clarify. 

[VolvoGirl · Accepted solution]

Yes it needs to know that for a couple reasons.  To determine  how much of your state refund is taxable if you itemized deductions on your federal return.  Also state payments you made in 2023 (for any year) can be a federal deduction if you itemize.  

If you took the Standard Deduction on the federal return you don't need to enter  a 1099G for state refund.  

[gunkiran1]

Thanks for your reply. Ok so this is not considered like a credit for 2023 taxes. It is used for some other calculations.  I was confused when this payment added to "Payments made with an extension" in section "Estimates and Other Taxes Paid" . The "Payments made with an extension" showed extension payments of 

2023 Federal + 2023 State + 2022 State. 

As long as  2022 State extension payment is not applied to 2023 State taxes, I should be good.

[Kiki]

gunkiran 1

I am trying to finish my tax now and have an exactly same question as you had right now.

What was the result?

Did Not it actually affect the 2023 tax?

It would be very helpful if you could tell me (maybe other people as well)

Thank you very much.