Discrepancy in State refund amount on 1099-G?

Forum|Forum|1 year ago
February 15, 2025
2 replies
0 views

Hi, I'm in the "Refunds Received for State/Local Tax Returns" section. I received a Colorado state tax refund last year after filing my 2023 taxes. Turbotax has prefilled the amount of the refund I see on my 2023 "Colorado Individual Income Tax Return" form. However, I received a 1099-G from Colorado and the "State Income Tax Refund" amount listed in Box 2 is much less than the amount I actually received (as seen on my 2023 return and my corresponding bank deposit). Box 3 confirms this is for the 2023 tax year.

So which amount do I put? The amount that was actually deposited to my bank or the amount on the official 1099-G from the state? And why would they be different?

TurboTax Premier Online

VolvoGirl

Employee

First let’s see if you need to enter a state refund. A State Tax Refund is taxable if you itemized deductions on that prior year's federal return and took a deduction for state income taxes instead of the sale tax. You got a deduction benefit for it so now you have to include it as income. If you took the standard deduction it is not taxable and you don't need to report it.

if you need to enter it you can change the amount to the 1099G.

Federal on left

Wages & Income

Scroll down to 1099-Misc and Other Common Income

You might need click on Show More to expand the section

Then it's the first line for Refunds Received for State/Local Tax Returns - Click Start

You do not want the next line that says Other 1099G Income

On the first screen check YES - Received a State Refund.

DaboaAuthor

Thanks for the reply. I can confirm that last year I itemized deductions and used my state income tax, not state sales tax in itemization. But I still don't understand why my 1099-G would be different than the amount I received.

I'm wondering if there is a portion of my refund that is not subject to federal income tax to account for this difference. For example, Colorado has a TABOR refund that, based on my Googling, looks like it wouldn't be taxed by the IRS but would have been part of the money received in my state refund last year. However, if I subtract this amount from what I received from the state last year, the result is less than what I see on my 1099-G, so I'm still uncertain and confused.

DaboaAuthor

I just deleted my state refund and went through the wizard to add it again. I used the amounts on my 1099-G. The wizard asked me if I itemized deductions and if anyone else claimed me a dependent (no) for my 2023 taxes. It then asked me to confirm 2023 federal return info, which I did. Finally, the wizard said, "Good News, your 2023 refund is not taxable." So I guess it's not taxable!

cbco7

NOTE: The following applies to users who will be paying quarterly Colorado estimated taxes in 2025.

I think that the 2024 TurboTax calculation of the Colorado quarterly estimated tax payment is incorrect.

During Step-by-Step, if user selects "100% (110%) of 2024 taxes", which is the default option, it appears to use the current year's CO tax (Form 104, line 12) less the TABOR State Sales Tax Refund amount (Form 104, line 35).

However, the Colorado Individual Income Tax Guide (link below) specifically says to exclude the "Sales tax refund credit" (Part 7. "Estimated Tax Payments: Net Colorado tax liability") when calculating the estimated tax amount. This makes some sense, because the actual TABOR sales tax refund changes from year to year, and is not released until around mid-October.

https://tax.colorado.gov/individual-income-tax-guide Note that this is not the same document as the "104 Book" that contains forms and line-by-line instructions. Caveat: the CO Guide also lists other exclusions which may or may not apply to a given user; I did not check to see how TurboTax handles those other exclusions.

What this means is that if you use TurboTax's 2025TY CO estimated tax calculation, you will be paying less each quarter than you should be. This can be verified by adding the Tabor sales tax refund amount to the amount on the TurboTax CO Estimated Tax Worksheet, Part 1, line 1a. The resulting amount should match Form 104, line 12.

Whether the amount of the quarterly estimated tax underpayment is important will depend on each user's individual tax situation. You could always increase your estimated tax payment each quarter and just amend the amount shown on that quarter's voucher.

This was still an issue in TurboTax as of 4/9/2025. Also note that I'm not a tax expert - am just reporting what I found while checking my return.

cc: @KrisD15