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Author: medgoddess Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120812  
Subject: Question about refunds Date: 2/5/2003 4:46 AM
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When do you need to call them income? For example, I did NOT deduct state/local taxes on my 2002 (the standard deduction was better for me). I will receive a small refund for the 2002 taxes in 2003.

I should be able to itemize in 2003. Do I need to include the refunds as income on the 2003 taxes if I'm going to itemize? I wasn't clear on it from the IRS site.

TIA,
Kristi
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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63501 of 120812
Subject: Re: Question about refunds Date: 2/5/2003 7:16 AM
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When do you need to call them income? For example, I did NOT deduct state/local taxes on my 2002 (the standard deduction was better for me). I will receive a small refund for the 2002 taxes in 2003.

I should be able to itemize in 2003. Do I need to include the refunds as income on the 2003 taxes if I'm going to itemize? I wasn't clear on it from the IRS site.


I don't know where you looked, but the instructions for line 10 of Form 1040 couldn't be clearer....

"None of your refund is taxable if, in the year you paid the tax, you did not itemize deductions."

Ira

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Author: medgoddess Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63506 of 120812
Subject: Re: Question about refunds Date: 2/5/2003 9:53 AM
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So does that mean that in 2003, when I will itemize and deduct 2003 taxes, my 2002 refund is taxable?

I can legitimately see it both ways - it not being taxable since in 2002 I didn't itemize or it being taxable since I received it in 2003 and I am itemizing then.

Not trying to be difficult...
Kristi

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63508 of 120812
Subject: Re: Question about refunds Date: 2/5/2003 11:52 AM
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So does that mean that in 2003, when I will itemize and deduct 2003 taxes, my 2002 refund is taxable?

What you do in 2003 has no bearing on whether your refund for 2002 state taxes is taxable. It all depends on what you did in 2002. If you deducted the tax payments on Schedule A in 2002, then the refund in 2003 is probably taxable. (You have to complete a short worksheet to determine if the refund is fully taxable. The simple answer is... if you had enough deductions to itemize without considering the state income tax deduction, the entire refund is taxable. If not, only a portion is taxable.)

I can legitimately see it both ways - it not being taxable since in 2002 I didn't itemize or it being taxable since I received it in 2003 and I am itemizing then.

As explained above, your actions in the year you receive the refund are irrelevant.

Not trying to be difficult...

Not difficult at all.

Ira


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Author: TMFDj111 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63535 of 120812
Subject: Re: Question about refunds Date: 2/6/2003 6:19 AM
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"None of your refund is taxable if, in the year you paid the tax, you did not itemize deductions."

However, your state income tax return for one year is taxable on your federal tax return the next year. States will provide their taxpayers a Form 1099-G to help them prepare their federal tax returns.

David Jacobs
TMFDj111

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63537 of 120812
Subject: Re: Question about refunds Date: 2/6/2003 7:03 AM
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me: "None of your refund is taxable if, in the year you paid the tax, you did not itemize deductions."

TMFDj111: However, your state income tax return for one year is taxable on your federal tax return the next year. States will provide their taxpayers a Form 1099-G to help them prepare their federal tax returns.

me: No. That's exactly the point I was making. Your state income tax refund for one year is not taxable on your federal return the next year if you did not deduct the state income tax in the year it was paid. It doesn't matter that the state sends you a 1099-G. Look at the instructions and worksheet for line 10.

Ira

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Author: medgoddess Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63638 of 120812
Subject: Re: Question about refunds Date: 2/8/2003 2:27 PM
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Thank-you.
Kristi

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