Received Refund for Amended 2018 Tax Return in 2020

[russeni]

I had to file an amended 2018 tax return in 2020 to fix a double counting issue with our investments.  As a result I received a refund for our 2018 Federal and Sate Taxes in 2020. My question is 2 part:

First, do I need to include the amount I was refunded by the state of MN in the section for "State and Local Tax Refund" even though it was for a prior years tax return?  I received the refund in 2020 which was a combination of the refund I should have had plus money I had mistakenly paid in for my 2018 tax return.  I took the standard deduction on our 2018 taxes.

Secondly, I received a 1099-INT for the interest paid me by the federal Department of the Treasury but I did not receive one from the MN Department of Revenue.  Do I need to claim the interest paid me by MN Department of Revenue even thought I did not receive a 1099-INT from them?

[DianeW777 · Accepted solution]

No.  You do not have to include the refund of state income tax in your taxable income for 2020, because you did not itemize your deductions to reduce taxable income on your 2018 tax return.  Since the itemized deductions were not used, then the state tax paid was not used to reduce your tax.

Yes. If you received interest, from the MN Department of Revenue, in addition to the tax dollars that were refunded to you it must be included in your income regardless if a Form 1099-INT was not issued.

Interest income is taxable starting at $1 from any source and must be included in your income whether or not a form is issued to you.

[JL-808]

2020 Turbotax interview did not ask if I itemized deductions in 2018.  I took the standard deduction in 2018.  I received a state refund in 2020 for filing an amended state tax return for 2018 as reported to me on 2020 1099-G.  Turbotax is reporting that this 2018 refund is taxable and included in Schedule 1, Part I, Line 1.  Should I override that entry and change it to $0?  It seems that Turbotax should ask me whether I used the standard deduction in 2018 and complete the Schedule 1, Line 1 properly instead of making me override its calculation.  Please confirm this is the solution to this error in the program. Thank you.

[AnnetteB6]

If you did not itemize deductions in 2018 and your state refund was for your 2018 return, you do not need to enter that Form 1099-G into your 2020 tax return.  

If there was any interest income included with the 2018 refund, then that should be entered in the interest income section.  Otherwise, do not override any entries and instead completely remove the entry for the 2018 refund.

@JL-808