Second of 2 1099-G state refund showing as income even though never itemized

[ppgengler]

Hello,

I received 2019 and 2020 state refunds, but due to filing 2019 taxes later in 2020, both refunds arrived in 2021. Therefore I received two 1099-G for the tax year 2021 from CO for the refunds. However, in both 2019 and 2020, I took the standard deduction and did not itemize my deductions. My understanding is that means neither refund should be reported as income; however, when I enter both 1099-G values into TurboTax 2021 (Premier version if it matters), it's omitting my 2020 refund from income, but adding in my 2019 refund in as additional income. I believe this is incorrect due to the standard deduction in both years, but it's unclear how I get TurboTax to recognize or agree with that. Any suggestions?

Thanks,

\Peter

[JillS56 · Accepted solution]

Yes, this is incorrect.  Since you filed using the standard deduction in 2019 and 2020, you do not have to report the income from the 1099-G.  

TurboTax is picking up the that you filed using the standard deduction for 2020 because that was the last year filed.   TurboTax cannot determine whether or not it is income for 2019 since 2019 is not linked to the 2021 return.  

I suggest removing the 1099-G for 2019 from your return.

[ppgengler]

Hi Jill,

Thanks for the quick reply! I was also thinking that, since I believe the IRS guidance is that it doesn’t need to be reported at all. I also looked through the forms from previous years, and I don’t think the data from the 1099-G is ever sent to the IRS from me; it’s in my worksheets, and the exclusion means a 0 on the Schedule 1 line 1, but I don’t have to ‘acknowledge’  it in any manner, so no difference to the IRS if I don’t put into TT. 

Does that all sound correct? My main concern with omitting from TT is if it somehow flagged an issue to the IRS, since I know the 1099-G is sent to them by CO, but since it isn’t on any forms sent to them from me, I think that means no discrepancy from their side?

Thanks,

\Peter

[Vanessa A]

It is perfectly fine to not enter the 1099-G's into TurboTax at all since they are not taxable income.  You are correct, if it was not taxable in past years, it would not have been sent to the IRS.  The IRS still receives the 1099-G from your state, but since they see you took the standard deduction, it does not raise any flags.