Massachusetts (MA): 1099-G as a result of Chapter 62F for tax year 2021

[RMD20201]

Hi,

I received a check from my state (Massachusetts/MA) in Nov. 2022. It is for Chapter 62F requiring the excess revenue be returned to taxpayers in proportion to the Personal Income Tax liability they incurred in Tax Year 2021. Do I have to report this somewhere on the 2022 Tax Return. It is super confusing as the 1099-G mentions "THIS IS NOT A BILL OR NOTICE OF REFUND. THE AMOUNT IN BOX 2 MAY BE TAXABLE INCOME ON YOUR FEDERAL TAX RETURN". I had itemized deductions on Schedule A (2021 tax return) and had entered the State and local taxes on line 5 of Schedule A and it was capped at the max. 

Could I get some guidance on this?

Thank you.

[MayaD]

Chapter 62F is a Massachusetts General Law that requires the Department of Revenue to issue a credit to taxpayers if total tax revenues in a given fiscal year exceed an annual cap tied to wage and salary growth in the Commonwealth.

According to IRS guidance issued February 10, 2023, 62F refunds are excluded from income for federal purposes if “the recipient claimed the standard deduction or itemized their deductions but did not receive a tax benefit (for example, because the $10,000 tax deduction limit applied).” IRS News Release 2023-23. Refund recipients who itemized on their federal returns for Tax Year 2021 will receive a Form 1099-G from the Department of Revenue.

Report. Mass.gov

Enter form 1099-G on your return and Turbo Tax will calculate the taxable amount.

Where do I enter a 1099-G for a state or local tax refund?

[Speechman]

Still very confused about the 1099G form I received from Massachusetts Department of Revenue. I itemize deductions and entered taxes as they are normally itemized.  Do I need to add this as extra income on my Federal Taxes?  VERY CONFUSING

[Speechman]

Also, what should it be reported as...none of the choices seem correct?

[AmyC]

Follow these steps:

1. Determine if you need to claim the income. Take a look at your 2021 tax return. 

• If you took the standard deduction - do nothing with the 1099-G
• If you itemized - look at your  sch A, line 7 for state and local taxes -were you capped at $10,000?
  • If no, then you need to enter the 1099-G.
  • f yes:
    • excess more than the 1099-G that was not allowed, do nothing with the 1099-G.
    • no excess, report the 1099-G

2. Tuck in to a folder or enter it into the program, select the state 1099-G. Claim it is a state refund and answer the questions.

@Speechman 

[Speechman]

Thank you for the clarification!

[RMD20201]

@AmyC and @MayaD : Thank you for your responses. Very helpful and I am sorry for the delayed response.