lipman@decwrl.UUCP (02/22/84)
Message-Id: <8402221323.AA12739@decwrl.ARPA> Date: Wednesday, 22 Feb 1984 05:20:22-PST From: erlang::whalen (An Italian at heart) To: net.taxes Subject: Re: Q on Refunds of State & Local Taxes (1040 line 10) I'm wondering about this one too. This year is the first year I've been able to itemize, and that line will mean something to me next year. My gut feeling on it is this: If you got a refund from the state (or local) so that you paid the state less taxes than you stated on schedule A then you report the refund. Here is an example; Massachusetts took out $1700 from my pay last year. After figuring out my state tax I found out that I overpaid $85. On my schedule A I put down that I paid the state $1615. Though I did get a refund I would say that I don't have to report it because I only deducted the amount of tax actually paid. I don't have any substantiation for this belief, I read the instructions a few times and still didn't know how to deal with it. I gave up because it doesn't affect me this year, but I'm going to find out for sure before sending off my return next year! Rich Whalen Digital Equipment Corporation UUCP: ...decvax!decwrl!rhea!erlang!whalen
halle1@houxz.UUCP (J.HALLE) (02/23/84)
You only need to report any state or local tax refund to the extent it reduced your tax. If you did not itemize, ie you took the standard deduction, you do not report it at all. If you did itemize and declared a deduction for the taxes paid, you must report the refund as income, WITH ONE EXCEPTION. Suppose your itemized deductions totaled $3500, including $900 for state tax. (Just example numbers. Assuming married so standard deduction is $3400.) You received a $300 refund. Only $100 of this is reported, as the remaining $200 did not reduce your tax. (I doubt that this exception ever happens, but it is part of the code.)
mark@elsie.UUCP (02/23/84)
One other exception (as I understand the tax code). If you only deduct the amount of state tax you actually owed, rather than what you payed out in the taxable year, then the refund is not taxable since it did not affect the tax you payed for the previous year. Generally, you're better off deducting the state tax (withholding + estimated) acutally *paid* in the year. Tax on the refund gets deferred until the next year (or at least 3 months if you have to pay estimated). -- Mark J. Miller NIH/NCI/DCE/LEC UUCP: decvax!harpo!seismo!rlgvax!cvl!elsie!mark Phone: (301) 496-5688
jhh@ihldt.UUCP (John Haller) (02/25/84)
You can only deduct actual taxes owed if you file on the accrual basis. If you file on the cash basis like most of us, you must report actual taxes withheld + excess owed from year before or - refund received. This means that all (non-federal, etc.) tax payments made in 1983, whether for 1982 taxes, or 1983 withholding, are 1983 deductions. Similarly, the payments received or made for 1983 state tax returns will not have any affect on the 1983 federal tax return. John Haller