IL State Refund - The American Rescue Plan Act

[grayslake_07]

Received a 2020 IL state tax refund as part of the The American Rescue Plan Act in 2022 because the state was behind on processing the amended tax forms.  How do I report this on my 2022 taxes so I'm not taxed on the state refund? 

[HelenC12]

Please clarify. 

1. Is the amount part of the state refund reported on Form 1099G or 
2. Is this interest income on your state refund that the state of IL was late in paying you?

[grayslake_07]

I filed 2020 taxes early before the change in the law concerning not taxing unemployment benefits as part of the The American Rescue Plan Act.  I amended my 2020 IL forms and received a state refund in Fall 2022 due to a back log.  The amount was a refund of $375 and interest of $18.27.  It's my understanding that the $375 should be non-taxable but I'm being taxed on it when I add it into TurboTax.  IL doesn't issue 1099G. The info I have is from a check I received explaining the refund.  

[ErnieS0]

Your Illinois state refund may be taxable if you itemized deductions in 2020. Otherwise, it is not taxable.

Here’s how to make your state refund not taxable.

1. Type 1009-g in Search (magnifying glass) in the top right corner
2. Tap Jump to 1099-g
3. On “Did you have any of these types of income?” tap YES
4. On “State and local tax refunds and other government payments,” select State or local income tax refunds, then Continue
5. On “Did you get a state or local tax refund in 2022?” say YES
6. Fill in your info on “Tell us about your refund,” then Continue
7. Tap Done on “State and Local Tax Refund Summary”
8. On “Refunds From Years Prior to 2021” enter $0 in Taxable Amount

The $18.27 you received in interest is taxable. Report that as you would interest from a bank.

              1. Type interest in Search in the upper right

              2. Select Jump to interest

              3. Say YES to "Did you have investment income in 2022?"

              4. Continue past "Get ready to be impressed"

              5. On "Let’s import your tax info" go to the bottom and select Enter a different way

              6. On "OK, let's start with one investment type," select Interest, then Continue

              7. On "How do you want to enter your 1099-INT," select Type it in myself

              8. On "Let’s get the info from your 1099-INT" enter your interest info

[grayslake_07]

I'm not receiving the "Refunds From Years Prior to 2021" after entering the state refund information. I'm only asked if I took the standard deduction or itemized deduction in 2021.  I'm working on Turbotax Home and Business desktop version.  Does this make a difference?  There is also a question asking for the Total of All Payments and Withholdings.  

[KrisD15]

The question is this-

If you had deducted 375 less in state tax on your Federal 2020 return, would you have had a higher tax liability?

Would you have had a higher tax bill or lower refund?

If yes, the refund would be taxable. 

If you itemized on your 2020 Federal return, and you claimed state income tax paid, you would need to re-compute your Federal  tax using the lesser amount of state tax on Schedule A. 

Keep in mind that because of the SALT (State and Local Tax) limit, you may not have been able to claim all the state tax you paid in 2020. 

If the tax you could deduct was reduced by 375 or more (because of the SALT limit), the refund is not taxable.

If deducting 375 more in state tax on your 2020 return would not change your Federal tax du, the refund is not taxable. 

If the refund is not taxable, simply do not enter it into the TurboTax program. 

State tax refunds are not "listed" on a tax return, only the amount is added to income if the refund is taxable.