Pub 525 says tax refunds need to be allocated to the year in which paid. How would you handle a 21 refund received in 24?
Update:
I also received a 20 refund in 24 and a 22 refund in 24, all from filing amendments. Isn’t the 21 return statute limited? If yes, how I do show the refund income & in which year?
2
✅ Answers
? Favorite Answer
Actually, you need to include the recovery amount as part of your gross income the year you got them.
For instance, you got 21 taxable year state refund in 24. You need to include the 21 state refund (part or all) in the tax year 24.
Anyhow, you should have got a 1099-G in the year 24.
Of course, Pub 525 tells you how to determine what is the correct amount of recovery.
I received a Form 1099-G, for my state tax refund. Do I have to include this amount as income on my return?
If you did not itemize your deductions on your Federal tax return for the same year as the state or local tax refund applies to, do not report any of the refund as income.
If you itemized deductions on your Federal tax return for 23, and received a refund of state or local taxes in 24, you may have to include all or part of the refund as income on your 24 tax return. Report your taxable State or Local Refunds on Form 1040, Line 10. You cannot use Form 1040A or 1040EZ. Refer to Tax Topic 405, Refund of State and Local Taxes , and Publication 525 , Taxable and Nontaxable Income , for further information.
A 21 refund is allocated to the 22 federal return. However, you need to check to see if your state tax refund is taxable at all. Here’s the rule from the 25 Instructions for Form 1040: “None of your refund is taxable if, in the year you paid the tax, you either (a) did not itemize deductions, or (b) elected to deduct state and local general sales taxes instead of state and local income taxes.”
In other words, did you itemize your deductions on your 22 federal return? If no, then there’s nothing to worry about. Your state refund is not taxable. If yes, then you need to check a couple of figures. Subtract your total itemized deductions from your standard deduction. This is the amount of your state refund which could be taxable.
Typically, this is easy enough to handle if you are preparing multiple years of tax returns at the same time. You just carry ’01 state refund to the ’02 return and figure out if it’s taxable or not.
Hope this helps! I have more resources covering back taxes on my website.
Take care.
William
Source(s): http://www.irs.gov/instructions/i1040gi/ar02.html#…
http://taxes.about.com/od/taxtrouble/a/back_taxes….