Ho Do I Report Oregon State 2019 Kicker on 2020 Return?

[StFarris]

I received an Oregon State kicker credit on my 2019 taxes.  While working on my 2020 taxes in TurboTax, I see where my Oregon refund is included but I don't see where the kicker credit is applied and I can't figure out where to enter it.

While I don't believe it is taxable in Oregon, I'm not sure if it is taxable to the IRS.

All the help topics I find are about where it shows up on my 2019 return, but I don't see how it transfers to my 2020 return.

[BillM223]

The kicker is the equivalent of a state tax refund. It is taxable in the next year only if you itemized deductions in the previous year. The rationale is that you got a tax benefit in the previous year for 100% of your state tax, so if you get a refund, you have to declare it as income the following year.

Later law changes have made this much more complicated because now state and law taxes (including the income tax) are now limited to $10,000.

So, before we go into that, did you itemize deductions on your federal return in 2019? If no, then the issue is simple: you don't need to report it.

See this old but still good column on the kicker by an IRS Senior Tax Consultant.

[StFarris]

Hello, thanks for the reply.

I did itemize in 2019, however my SALT deduction was limited by the $10k max.  So it appears the kicker doesn't have any effect on my State tax deduction.

Even still, I'm wondering why it doesn't show up in TurboTax under state tax refunds.  The rest of my sate refund does show up.  I wanted to make sure I wasn't missing something.

[BillM223]

Second things first...it doesn't show up on your state refunds because it wasn't reported on a 1099-G. But you still treat it like a state refund.

As for the SALT limit, whether or not you derived a benefit from the kicker depends on what those other amounts were. But since the kicker is a refund of income taxes, then it depends on whether you could get to the $10,000 cap without the income taxes.

Take a look at this IRS page to see how the taxable portion of a state tax refund is calculated. Look at the link for the IRS ruling at the top for some examples.

If this doesn't make sense, come back and tell us the amounts in the State and Local taxes, and let's try to work it out.

[fanfare]

The kicker is not taxable.

If you got a 1099-G for OR rebate you could enter it.

If you did not itemize in 2019, don't bother because it will not affect your tax return.

[StFarris]

Second things second... I did indeed get a 1099-G, that is what prompted me to go back and try to understand this.  

I think I understand the tax implications.  Where I am struggling is how to make sure Turbotax has the information entered correctly.  Another response suggests just inputting another 1099-G.  When I do that, TurboTax warns me that it already has a 1099-G from Oregon (for my actual tax refund).

It's a little bewildering to me that TurboTax doesn't just show the kicker, since TurboTax helped me figure out the kicker.

[MaxedOut]

Thanks, @StFarris for posting this question as we are in the same situation. Did you find a resolution to this and if so, can you share? We find it equally puzzling that it is not easier to record/log the kicker in TT.

[StFarris]

No, I never received a good explanation of why TurboTax didn't show the kicker refund.  I went ahead and manually entered a 1099-G for the refund, which had no effect on my taxes since I was already over the $10k SALT limit.  This just seems like quite an omission on the part of TurboTax.

[AmyC]

Let me help, 95% of people do not itemize. Of that 5%, very few are from OR and receiving the Kicker Credit. You are in a very small group.

@BillM223 is correct above when he says that it may be taxable if you itemized the year before. As  @StFarris learned, no effect since already over the $10K SALT limit.

@MaxedOut the kicker should be on a 1099-G to enter.

The suggestion of showing the Kicker would be something to recommend after you file your return and give your opinion. Those comments are read. Smart thinking!

[MaxedOut]

Circling back on this discussion, with a bit more explanation and (hopefully) a more exact question:

Background:

2019 Tax Returns

* We received an OR kicker in 2019 of $4000 (rounding)

* The $4000 reduced our state taxes due. We still had to pay OR state taxes of $450.

* On the 2019 federal return we itemized. On Schedule A, the kicker was useless as state taxes paid far exceeded the $10,000 (similar to @StFarris 's case)

2020 Tax Returns

* We received a 1099-G for the 2019 kicker of $4000

Question:

First, do we enter 1099-G under "Wages & Income" or under "2019 State Taxes Paid in 2020"? That is, is it an income or a deduction?

If under Wages and Income:

* In TT, we see we can enter the 1099-G as "State and Local Tax Refunds on Form 1099-G" but we paid taxes on our state return and did not get a refund.

* In TT, we also see an option to enter "Other 1099-G Income". We come to an option to select the type of payment with options as:

          * Taxable grant

          *Agricultural program payment

          * Market gain on CCC loans

          * Reemployment trade adjustment assistance (RTAA) payment

          * Business or farm tax refund

None of these appear applicable. Perhaps the "Taxable grant" is the closest item. Doing so, brings us to a page asking to describe the Taxable Grant with the following options in Payment information:

          * Business or farm refund

          * Reemployment trade adjustment assistance (RTAA) payment

          * Taxable grant

          *Agricultural program payment

          * Market gain on CCC loans

Again, none of these really apply with the exception of Taxable Grant. If we enter $4000 in taxable grant, our Federal and State taxes go up by $1800 and $500, respectively. However, we did not take the itemized deduction on the Federal return, although we did receive a $4000 benefit. Is this where we enter the 1099-G for the kicker?

If under 2019 State Taxes Paid in 2020:

If we paid $20,000 in state taxes in 2019, received the $4000 kicker (officially released in 2020) and owed another $450 in state taxes (paid in 2020), what do we enter in 2019 state tax paid in 2020, if anything? Options are:

          * $4,450 = $4,000 (kicker) + $450 (paid on state tax return) - results in federal tax dropping $18

          * $450 = $450 (paid on state tax return) - results in federal tax dropping $2

Thank you in advance for any guidance you can provide.

[DaveF1006]

According to this Turbo Tax link written by Agent BillM223, "the kicker is the equivalent of a state tax refund. It is taxable in the next year only if you itemized deductions in the previous year. The rationale is that you got a tax benefit in the previous year for 100% of your state tax, so if you get a refund, you have to declare it as income the following year." If you did not itemize in 2019, you do not need to report it.

If you did itemize in 2019, you would enter this under wages and income>other common income>state and local taxes refunds on form 1099G.  You will enter the full amount of the kicker received that is listed on the 1099G.

[lfrusa]

Hi @DaveF1006, i have a clarification question on your post. I owed $20k in Oregon taxes last year (2019), of which i paid $18k through payroll deduction, but then got a $4k kicker when I filed, which means I was refunded $2k. This year when TT imports my previous taxes, it auto filled this section with the Total Refund Received in 2020 of $2k and the Total of all Your Payments and Withholdings of $20k for 2019, both correct values applied appropriately from last year's tax return. However, the 1099-G I received from Oregon only shows both the State and Total Tax Refund values of $4k (kicker). I itemized in both federal ($15k) and OR state taxes ($9k).

So at this point I'm basically not entering the 1099-G value anywhere, instead TT is recommending a different value to use. Does that seem wrong? Is OR basically sending me a value I don't need to use? Or should I update TT recommendation of my refund ($2k) to the kicker value ($4k) as shown in the 1099-G? Or should I enter in it as a second and separate item? You mentioned we should enter the value in the 1099-G form sent by Oregon, which in this case is $4k (kicker) but that info was available in my TT filings last year, so why is TT auto filling or recommending a different value? It filled in the actual refund I got in the Total Refund Received ($2k) section which seems appropriate given the name.