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Level 2

Why is turbotax not reflecting my State and Local Taxable Tax Refund in the NY Income Adjustments section?

Hi everyone.  

 

Last year, TT accounted for my NY state/local tax refund on my State return, under the heading "What's Been Subtracted From Your Federal Income (Subtractions)". 

 

However, this year TT does not seem to have done so (as displayed on the comparison screen between last year and this year - it is showing the correct amount for 2018, but $0 for 2019).

 

I verified via form 1099-G that i DID receive state income tax refund for the year 2018.

Any idea why?  And whether I need to manually update or adjust - and if so, where in TT I can do so?

 

* EDIT * I went through the TT Federal / Income section again and can clearly see that the State/Local tax refund is displayed correctly under "Refunds Received for State/Local Tax Returns."  So if that refund is in TT, why is it not being displayed/counted in the State section?

 

 Thanks!

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Level 15

Why is turbotax not reflecting my State and Local Taxable Tax Refund in the NY Income Adjustments section?

@GottaPayMyTaxes 

 

Well, when you said:


....."I checked Schedule 1 and i DO see the state 2018 tax refund showing on Schedule 1 in part 1."

 


.....as long as you were talking about seeing the state refund in Part I of the  "State and Local Income Tax Refund  Worksheet"   then that is OK....(.In my prior post, last paragraph...I was talking about line 1 of the actual Schedule 1 being a zero,   not Part I of the worksheet )

 

anyhow...Yes, as long as all the values from your 2018 Federal tax return have been entered correctly in Parts I, II and III of  the "State and Local Income Tax Refund  Worksheet"...and if Part IV (line 14) is a zero....THEN the refund is not added to Federal gross income (AGI). 

 

 AND then ...if your state forms use Federal AGI as it's starting point, then the state refund doesn't need to be subtracted from that since it wasn't included in Federal AGI in the first place.

___________________________________

Now, IF you auto-transferred your 2018 tax data into the 2019 forms when you started your 2019 tax return, those values should be correct....but if you manually entered them, then the calculation depends on the accuracy of your entries of all those 2018 values.

View solution in original post

4 Replies
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Level 15

Why is turbotax not reflecting my State and Local Taxable Tax Refund in the NY Income Adjustments section?

Well, the primary reason why it might not be subtracted, is if the refund wasn't

added to your Federal income in the first place.....two different ways

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1)  Because of the much larger Standard Deduction instituted for 2018 taxes, many people found that their 2018 taxes no longer used "Itemized Deductions".  So if your 2018 Federal tax return used the Std Deduction, then the State refund received isn't added as taxable income on the 2019 Federal tax return....so it doesn't have to be deducted from that Federal AGI for determining State AGI either.  You still can input the State Refund in the Federal section of the 2019 software....but whether it is used or not depends on whether it was actually used for a 2018 Federal income deduction or not.

 

or

2)  Perhaps you did use itemized deductions in 2018 for your Federal tax return...but, perhaps, your state income+property taxes paid deduction on the 2018 Federal tax return in 2018 was limited by the $10,000 max State Property+Income taxes deduction allowed for those state+local taxes paid.  In that situation, whether the state refund is added to Federal AGI is determined by how much of your state taxes, over that $10,000 could not be used in 2018, and the size  of the state refund you received in 2019 for those 2018 state taxes.   Again, if the state refund was not added to Federal AGI for this reason, then the refund isn't subtracted from state AGI since it wasn't in there in the first place.  (not sure exactly how that is actually figured, but the software figures it out based on your 2018 data)

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In both cases above, if you transferred in your 2018 tax file into your 2019 tax file when you started your 2019 tax return, and if you entered the State refund 1099-G into the software into the 2019 Federal income section....then the software would determine whether it was actually going to be added into Federal AGI.  IF you started a 2019 tax file without transferring in the 2018 tax file information, then, whether or not the State Refund 1099-G $$ amount was added into Federal AGI would depend on your answers to the questions in the interview, during the entry of that state refund, about what your 2018 tax situation was as you entered that 2018 state refund into the Federal income section.

 

As long as you entered the sate refund into the 2019 tax software, you can see whether it was added into Federal AGI by looking at your 2019 Federal Schedule 1, line 1.  IF you have no schedule 1, or if line 1 is a zero on that schedule, then your State refund was not added into Federal AGI in the first place...so no State deduction of that same amount was needed.

 

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Level 2

Why is turbotax not reflecting my State and Local Taxable Tax Refund in the NY Income Adjustments section?

Hi @SteamTrain

I completed my 2019 federal and state tax returns, but did not yet send them. 

 

I checked Schedule 1 and i DO see the state 2018 tax refund showing on Schedule 1 in part 1.

However, I also see that after all of the parts were populated and calculated, Part 4 shows a Taxable Refund of zero.

Does that explain why the state portion of TT (and my state return) is not reflecting the refund?

 

Just to i understand what this is all about... is the point of all this to adjust my state tax return in a situation where the IRS is COUNTING as income on my 2019 return my 2018 refund (received by me in 2019) - and so the state would then DEDUCT that amount from what the state counts as income (because it's a refund from the state, they will not count it as income because it's essentially not earnings but an overpayment i made to the state in 2018)?

 

If the above is true, then i assume that the reason the IRS counts it as income is because it is income - in the sense that the state is giving me my money back and it is therefore part of my earnings. Is that correct?

 

Thanks again for your help!

 

 

Highlighted
Level 15

Why is turbotax not reflecting my State and Local Taxable Tax Refund in the NY Income Adjustments section?

@GottaPayMyTaxes 

 

Well, when you said:


....."I checked Schedule 1 and i DO see the state 2018 tax refund showing on Schedule 1 in part 1."

 


.....as long as you were talking about seeing the state refund in Part I of the  "State and Local Income Tax Refund  Worksheet"   then that is OK....(.In my prior post, last paragraph...I was talking about line 1 of the actual Schedule 1 being a zero,   not Part I of the worksheet )

 

anyhow...Yes, as long as all the values from your 2018 Federal tax return have been entered correctly in Parts I, II and III of  the "State and Local Income Tax Refund  Worksheet"...and if Part IV (line 14) is a zero....THEN the refund is not added to Federal gross income (AGI). 

 

 AND then ...if your state forms use Federal AGI as it's starting point, then the state refund doesn't need to be subtracted from that since it wasn't included in Federal AGI in the first place.

___________________________________

Now, IF you auto-transferred your 2018 tax data into the 2019 forms when you started your 2019 tax return, those values should be correct....but if you manually entered them, then the calculation depends on the accuracy of your entries of all those 2018 values.

View solution in original post

Highlighted
Level 2

Why is turbotax not reflecting my State and Local Taxable Tax Refund in the NY Income Adjustments section?

@SteamTrainThanks very much, really appreciate the detailed responses

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