Returning user of TurboTax after 15 years. In 2023 I received two income tax refunds from the same city: one for tax year 2021 and the other for 2022, and entered them separately. TurboTax says the 2021 refund is taxable while the one for 2022 is not. Am I correct in saying both are NOT taxable because I took the standard deduction in both years? If so, it appears the software assumes I itemized in 2021 because it only asked if I took it for 2022.
@Milford wrote:
I appreciate the picture but I do not get that screen. When I click DONE on the Refund Summary screen I get a screen asking if I took the standard deduction in 2022 to determine if my 2022 refund is taxable. I answer that I did and click CONTINUE and the next screen states the 2022 refund is not taxable. I click CONTINUE and am taken to the Your 2023 Income Summary screen. No questions about 2021.
Obviously, I'm working around this problem because I know it's not taxable. Could this be a different between TurboTax products?
I had tested with only a 2021 refund. When I entered two refunds, one for 2021 and one for 2022, I got the same results as you. It asks about the 2022 refund and treats the 2021 refund as fully taxable, without asking. So it's a bug in the interview, but it only occurs if you received two refunds in one year, which is very uncommon.
It's the same in Deluxe and Premier, so it's probably the same in all products.
The simplest workaround, since you did not itemize for either year, would be to simply delete both refunds on the summary page. There is no need to enter them if you know they are not taxable, even if you got a 1099-G.
You are correct that the city income tax refunds for 2021 and 2022 are not taxable if you took the standard deduction on your federal tax returns for 2021 and 2022. If you know that the refunds are not taxable, the simplest thing to do is to not enter them in TurboTax at all. There is no requirement to enter them.
TurboTax does not assume that the 2021 city tax refund is taxable. It does not calculate the taxable amount for years earlier than 2022. When you entered the refund, if you indicated that it was for 2021, TurboTax asked you to enter the taxable amount, which you have to calculate yourself. The screen where it asks is not clearly worded, but it tells you to enter zero if you did not itemize on your federal tax return for that year. That screen initially has the full amount of the refund entered as taxable. You are supposed to change it to zero if none of it is taxable. Because of the unclear wording, you might have misunderstood the screen and clicked Continue without changing the taxable amount to zero.
Thank you, RJS. I'm with you all the way till you say TurboTax will ask me for the taxable amount of my 2021 refund. There is no such screen, hover-over icon, or any other option or prompt that tells me to enter zero if I itemized in that tax year. My only choice is CONTINUE and that takes me to the State and Local Tax Refund Summary screen and there's nothing about that there, either. (I'm using TurboTax Deluxe.)
The screen that asks you for the taxable amount comes after the State and Local Tax Refund Summary. On the summary screen click Done. Then you will get the screen shown below. (I added the red lines.)
I appreciate the picture but I do not get that screen. When I click DONE on the Refund Summary screen I get a screen asking if I took the standard deduction in 2022 to determine if my 2022 refund is taxable. I answer that I did and click CONTINUE and the next screen states the 2022 refund is not taxable. I click CONTINUE and am taken to the Your 2023 Income Summary screen. No questions about 2021.
Obviously, I'm working around this problem because I know it's not taxable. Could this be a different between TurboTax products?
Did you enter them on separate lines? Enter the total from tax year 2021 and tax year 2022 separately.
@Milford wrote:
I appreciate the picture but I do not get that screen. When I click DONE on the Refund Summary screen I get a screen asking if I took the standard deduction in 2022 to determine if my 2022 refund is taxable. I answer that I did and click CONTINUE and the next screen states the 2022 refund is not taxable. I click CONTINUE and am taken to the Your 2023 Income Summary screen. No questions about 2021.
Obviously, I'm working around this problem because I know it's not taxable. Could this be a different between TurboTax products?
I had tested with only a 2021 refund. When I entered two refunds, one for 2021 and one for 2022, I got the same results as you. It asks about the 2022 refund and treats the 2021 refund as fully taxable, without asking. So it's a bug in the interview, but it only occurs if you received two refunds in one year, which is very uncommon.
It's the same in Deluxe and Premier, so it's probably the same in all products.
The simplest workaround, since you did not itemize for either year, would be to simply delete both refunds on the summary page. There is no need to enter them if you know they are not taxable, even if you got a 1099-G.
My data entry screen looks like yours. When I get to the summary screen it shows my two entries: one for 2022 and the other for 2021.
I have the same exact problem. Turbotax did not ask me whether I itemized 2019 and 2220 returns (I did not) for which I got the refund this year and the local tax authority sent me 1099-G. It asked me whether I itemized for 2022 and I did not, so Turbotax excluded my 2022 refund. I am not reporting the 2019 and 2020 refund. I am assuming I am correct.