I amended prior year state tax returns (19, 20 & 21) and the returns resulted in a refund (I overpaid). Am I required to claim these state returns on 2023 federal return?

Forum|Forum|2 years ago
February 6, 2024
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Best answer by DMarkM1

My apologies, but this latest response has resulted in additional confusion (most certainly related to my lack of experience in tax law/rules). I’m not certain if it matters, but the aforementioned amended state tax returns for 19, 20 and 21 were directly related to my military retirement pay which is not taxed in AL. I made clerical errors on those returns, resulting in a decreased refund (to account for the military retired pay not being taxed) until I filed the amended state returns and received the remaining balance of refunds owed to me for 19, 20 and 21. Thanks again for your assistance!

The reason for the additional state refund is not relevant. You should have received forms 1099G from AL that show any state tax refunds you received in 2023. Since you itemized in those past years and took a deduction for state taxes paid, you will need to have a copy of those returns with you as enter the form 1099G information in your 2023 tax returns.

TurboTax will ask for amounts from specific lines on those returns. TurboTax will then calculate how much, if any, of those refund amounts are taxable and put them on your 2023 tax forms as applicable. You simply find/enter the amounts when asked.

The place to enter those state refunds is "Wages & Income">"Other Common Income">"Refunds Received State/Local returns"

Thank you for your service.

JulieS

It depends on whether your deducted your state income taxes in 19, 20 and 21.

If you deducted your state income taxes as itemized deductions and later got a refund of part of the amount you deducted, that is taxable income in the year that you get the refund.

If you took the standard deduction, the refunds aren't taxable and don't have to be entered.

If you need to figure the taxable amount, this is how to do that in TurboTax:

Open your TurboTax account.
Select the down arrow to the right of Income & Expenses.
Select Review/ Edit.
Select Start or Revisit to the right of Refunds Received for State/Local Tax Returns.
Answer the first question Yes.
Enter the details about your refund, or the information from 1099-G here. You will need to report each refund separately.
Repeat for the other two years.

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bos7-aol-comAuthor

Hello, and thank you for your response. I do see state taxes listed on schedule A (itemized deductions), however, please allow me to further explain the circumstances surrounding my situation. While filing my 2022 taxes, I realized that I had made a clerical error regarding my military retired pay (not taxed in AL) for tax years 19, 20 and 21. Upon filing an amended state return for all three tax years, AL agreed with my assessment and processed additional tax refunds to account my clerical error. Apologies for the lengthy response, however, I want to ensure that I process my 2023 return correctly. And, obviously, if I do have to list the above mentioned state refunds on my 2023 return, it will negatively impact my tax refund. Thanks again for your assistance, and I would be happy to speak with someone on the phone if it would help to clear up any confusion.

KrisD15

You would need to determine if the refunded tax would have made a difference on the federal return for those years.

If it does, the difference in your tax liability for the previous years, is the amount you need to claim as a refund (income) for 2023.

So for the refund that was for your 2019 return, you would need to go to your 2019 Federal Return and subtract that refunded amount from any state income tax deduction you took.

Example, you were refunded $1,600 for 2019.

On your tax year 2019 federal return you itemized and claimed 2,000 state income tax.

Re-figure that return with 400 state income tax claimed on Schedule A

If your tax liability increases, claim the amount it increased as income (enter the increase in tax as a state tax refund amount on your 2023 federal return.)

Repeat for 2020 and 2021.

Only use the amount of refund attributed to that tax year.

If you used the Standard Deduction any year, the refund attributed to that year is not taxable and you don't report it.

If you Itemized but claimed state sales tax rather that state income tax, the refund attributed to that year is not taxable and you don't report it.

If your adjusted tax liability does increase for a year you Itemized, but using the Standard Deduction that year would have resulted in a lesser tax liability increase than the adjusted one, (or no increase at all) use the lower tax increase (or zero) and claim only that as income.

Keep a copy of everything with your tax file including the computations of the previous years.

You could also have TurboTax calculate the refunds for you, but you'll need to dig into those prior year returns to get the numbers it need, including the state tax you claimed.

If the refunds for the three years were issued on one 1099-G tax refund, you will need to enter as if you received three separate refunds into the program.

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