Is it actual income??

[Bain999]

2020 Arkansas tax had an over payment amount which was left on file with Arkansas.  No money was received, it just sat in the Arkansas system somewhere.

TurboTax wants to declare this amount as income on the 2021 Federal return. 

Is this a correct interpretation if no actual money was received?

[Vanessa A]

The only way your tax overpayment from Arkansas is taxable income is if you took an itemized deduction for it in 2020.  Even if you did not actually get the refund in hand and you just left it in your account to be used for the following year, you still "received" the refund as a credit for the following year for an amount you deducted from your income. This would make it taxable. 

If you took the standard deduction in 2020, then it would not be taxable and you should not enter it on your return. 

[Bain999]

Good answer -- thank you for taking the time to help.