Had to file an amended state return for 2021 due to posting another states income in the wrong spouse column. Discovered error while doing my 2022 return and thus filed the amended state return in March of 2023. The state advertises that it will take 6-9 months to receive the amended refund. Received the actual refund in October2023.
I added it to the turbo tax program under the "refund" section of income. I have only taken the standard deduction (no itemization) since 2020. TT put this amount in the "additional income" section increasing my AGI by that amount. So basically it shows an increase to my income. I think most likely cause the program in the "refunds entry" section only refers to 2022 refunds and not any other year. The program actually confirmed that no tax was due because I did not itemize. However TT put it on the State refund worksheet under "previous years state/local refunds". So it added to my income.
I dont think I should have to inflate '23 income by this amount as if I did not make the error it would have been a larger state refund for 2021 which would not have generated additional tax for my 2022 return cause I didnt itemize.
SO I AM OPEN TO OTHER VIEWPOINT OR RECOMMENDATION OF WHETHER OR NOT I SHOULD SHOW THIS REFUND AMOUNT ON MY '23 FEDERAL FILING. BECAUSE IT WOULD NEVER HAVE BEEN TAXED, I THINK I SHOULD JUST LEAVE IT OFF MY '23 RETURN.
THOUGHTS?
If you didn't itemize in 2021, your State Refund would not have been taxable in 2022, as you mentioned.
Only the instance where you deduct state and local taxes, and then receive that portion as a refund becomes taxable when received.
Yes, you could delete this income from your 2023 return and just save the documentation in case it's needed later.
Here's more info on Are State Refunds Taxable?