No, your 2020 DC refund amount will not be referenced anywhere on your 2021 return since you did not itemize last year, and no it should not cause a flag during review. TurboTax saved the amount and entered it. If you had itemized last year and some or all of the refund was taxable (it isn't), TurboTax would have included that amount as income on your 2021 return. But since it is not taxable, the information is in the background of your tax return, but nothing about the refund is included with the tax return that gets sent to the IRS.
If you took the standard deduction in 2020, your DC tax refund would not be taxable on your 2021 return
Only if all three of the following are true, your refund counts as taxable income:
- You itemized deductions last year, instead of taking the standard deduction
- You claimed state and local income taxes (not general sales taxes)
- Claiming the deduction helped you increase your federal refund or lower your tax bill
And yes, you can file without the 1099-G for the tax refund since you (and the IRS) know it is not taxable. They are NOT required to send you a 1099-G if they know you took the standard deduction the previous year. They are only required to send it to the IRS. See the 2nd paragraph from the IRS instructions for Form 1099-G.
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