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I got a 1099-G from the state of NJ. I moved here in 2007 and did a part-year return last year. I did itemize federally last year (although I usually do not), so that makes sense.

Problem is, on my part-year 2007 return, I *owed* (and paid) taxes to NJ.

The only payment I got from NJ during the year was the property tax rebate that everyone gets. "Ah ha!" you say, "mystery solved". Not so fast. The tenant rebate is $40. My 1099-G says $30.

So, what the heck is my 1099-G for? I had no income tax rebate. The amount is wrong for the property tax rebate.

I can't call the Division of Taxation on the weekend, so I thought I'd ask here in case anyone is familiar with the situation.
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I got a 1099-G from the state of NJ. I moved here in 2007 and did a part-year return last year. I did itemize federally last year (although I usually do not), so that makes sense.

Problem is, on my part-year 2007 return, I *owed* (and paid) taxes to NJ.

The only payment I got from NJ during the year was the property tax rebate that everyone gets. "Ah ha!" you say, "mystery solved". Not so fast. The tenant rebate is $40. My 1099-G says $30.

So, what the heck is my 1099-G for? I had no income tax rebate. The amount is wrong for the property tax rebate.

I can't call the Division of Taxation on the weekend, so I thought I'd ask here in case anyone is familiar with the situation.


I'm in NJ and I can't help you. <g> There's no accounting for what the NJDoT does or doesn't do. You'll have to call them.

Ira
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The only payment I got from NJ during the year was the property tax rebate that everyone gets. "Ah ha!" you say, "mystery solved". Not so fast. The tenant rebate is $40. My 1099-G says $30.

So, what the heck is my 1099-G for?


Something that's non-taxable. As I understand the saga, you didn't get an income tax refund, and the property tax rebate you received is for property you don't own and, thus, don't pay taxes on.

My only question, which I thought Ira would address, is whether that is considered to reduce your 2008 NJ taxes paid, but if you don't itemize on your 1040 the question is moot anyway.

Phil
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Something that's non-taxable. As I understand the saga, you didn't get an income tax refund, and the property tax rebate you received is for property you don't own and, thus, don't pay taxes on.

Yeah, I agree it *should* be non-taxable, but I'd like to know what it *is*, so if I get a letter from the IRS about it, I can defend it :). I guess I was hoping Ira would say "yeah, $10 of your property tax rebate is actually considered 'return of capital' due to something-something, so $30 is right". No such luck! Guess I'll call on Monday.

And, by the way, in NJ renters still receive a NJ property tax rebate - as well as deduction/credit - (although a small one) because a portion of rent is considered to cover property taxes.

So yeah, as a non-homeowner, I couldn't deduct it on my federal return, so it definitely shouldn't be taxable on my federal return this year.

One new detail:
Looking over my 2007 NJ return, the *only* amount I see of "30" is the total of my charitable contributions through the return. But that would be a deduction, not an amount to appear on a 1099-G box 2.

I guess the most likely explanation is NJ just messed up the amount of my property tax rebate?


My only question, which I thought Ira would address, is whether that is considered to reduce your 2008 NJ taxes paid, but if you don't itemize on your 1040 the question is moot anyway.

Does this answer your question Phil? :)
http://www.state.nj.us/treasury/taxation/pdf/irsnewsrelease....
It seems to be treated as recovery from the previous year.

However, of interesting note, that says NJ will not issue a 1099-G for property tax rebates. So now I'm even more confused.
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My only question, which I thought Ira would address, is whether that is considered to reduce your 2008 NJ taxes paid, but if you don't itemize on your 1040 the question is moot anyway.

I'm not sure I understand your question. I assume that you're thinking of something analogous to the situation where you make your last 2007 estimated tax payment in 2008, get a refund and have to allocate part of the refund to income (form 1040 line 10) and part as a reduction in current year taxes paid (Schedule A).

Without knowing why the 1099-G was issued, any response would be pure speculation.

Ira
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I just thought of another possible reason you might have received a 1099-G from NJ. Did you have multiple employers in 2007? If so, it's possible that the combined mandatory NJ WC/UI/DI exceeded the maximum for the year. Any refund of the excess withheld would be considered the same as an income tax refund and would be subject to the usual reporting rules for 1099-G income.

Ira
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Hmmm, I *did* have two employers in 2007, but only one was in NJ. I moved here from Ma is late summer 2007. Plus, I don't recall receiving a check for anything like that.

I just flipped through my checkbook of that bank I've used since I moved here looking for anything to remind me of anything the state of NJ may have paid me. The only thing I see is the property tax rebate, which is (still :) ) the wrong amount. Of course, sometimes I just write "deposit" without explaining what I was depositing.
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So I got an answer, but it leaves me both slightly less and slightly more confused.

The Dept of Taxation rep tells me that the 1099-G *is* for the $30 of charitable contributions that I included in my 2007 return. He says the state "considers it an overpayment". But, but... its money *I* paid *them*.

I feel more confident (I guess) that I need not include this on my return, but isn't that logical completely backwards?
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The Dept of Taxation rep tells me that the 1099-G *is* for the $30 of charitable contributions that I included in my 2007 return. He says the state "considers it an overpayment". But, but... its money *I* paid *them*.

Back up the truck a minute.

Did you use some of your potential 2007 refund to make "check the box" type of charitable contributions on your 2007 tax return? Basically you tell the state to keep a portion of your refund and send it to a charity.

If so, you've got to separate these in your thinking. First, you have some kind of overpayment on your tax return. That overpayment is what generates the 1099-G. THEN, you make a separate contribution of that overpayment. It's really no different from the state sending you the refund and then you writing a check for the contribution.

So the 1099-G is not for the contribution - the money you sent them. It's for the refund - the refund you donated.

--Peter
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I understand your thinking, but, no, I did not.

I owed them $30-something dollars flat out. Then I added $30 of contributions. In total I sent a check for $60-something. I received no money from them, nor did I redirect potential refund to a charitable contribution.
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The Dept of Taxation rep tells me that the 1099-G *is* for the $30 of charitable contributions that I included in my 2007 return. He says the state "considers it an overpayment". But, but... its money *I* paid *them*.

I feel more confident (I guess) that I need not include this on my return, but isn't that logical completely backwards?


No. In 2008:

1. You paid an income tax balance due of $X. and

2. The state refunded $30 of that to you, retaining $X-30. and

3. You made a charitable contribution of $30, using the $30 that the state refunded you. It's somewhat akin to reinvesting dividends. The money never passes through your hands, but it's still two distinct transactions.

See IRS Publication 525 for instructions on how to allocate the $30 refund on your 2008 return.

Phil
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Oy, I guess I can see that. Only doesn't that completely eliminate any tax benefit I'm supposed to receive from giving a charitable contribution? (not that I itemize often)

Because my 1099-G income will offset my Schedule A contributions. My net effect will therefore be zero. And that's *only* if I itemize. If I do not itemize in the current year, but did last year, then I actually pay taxes on my contributions while receiving no tax benefit. I actually end up *paying taxes* on my charitable contribution amount.

If this is true, as nice of a concept as it is, then I think I'm done giving contributions through my return.
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I owed them $30-something dollars flat out. Then I added $30 of contributions. In total I sent a check for $60-something. I received no money from them, nor did I redirect potential refund to a charitable contribution.

Then I've got to agree with you. The whole situation sounds weird.

At this point, I'd drop back to Phil's usual position on 1099s: They are for the IRS's benefit and not yours. IOW - do what's right and not necessarily what the 1099 says.

So I'd not report any tax refund income, and I'd claim the itemized deduction for charitable contributions.

But hang on to your documentation in case the IRS asks. That would include a copy of your 2007 state tax return and the canceled check (or other payment record) for the payment you sent in.

--Peter
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Only doesn't that completely eliminate any tax benefit I'm supposed to receive from giving a charitable contribution?

Let me review the facts as I understand them. Suppose the balance due, absent charitable contributions, was $31. (Number picked to distinguish tax from charity.) You mail NY a check for $61 in 2008, to settle your 2007 NY tax return.

per Phil, this breaks down into 3 transactions:

1) a state tax payment of $61
2) a state refund of $30
3) a charitable contribution of $30

Per Pub 525, under recoveries: Recovery and expense in same year. If the refund or other recovery and the expense occur in the same year, the recovery reduces the deduction or credit and is not reported as income.

So on the face of things, you should net the $61 tax payment with the $30 tax refund, giving you $31 of state taxes that could be included on Schedule A for 2008. Assuming appropriate documentation, you also have a $30 charitiable contribution that could be included on Schedule A. This is the same result you would get if you regarded the $61 as being a $31 tax payment plus a $30 charitable contribution.

However, there may be something else lurking in the details of your 2007 tax return. You may have paid a tax that is not an income tax. For example, on my NY return I pay NY use tax for internet purchases that weren't assesed sales tax. Say I have $18 of use tax included in my tax bill, and I get a refund of $200. NY will issue me a 1099-G for $218, because I used $18 of my income tax withholding to pay non-deductible use tax. If I ended up owing $10 and sent them a check, NY would send me a W-2G for the $8 I would have got as a refund if I hadn't owed the use tax.

I don't know what's on a NJ return. Is is possible that you had $61 of something that isn't a state income tax included in the bill that netted to your owing $31 before the charitable contribution?

Patzer
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Excellent thought (though not the case) Patzer... and one that will haunt me from now on doing my taxes :)

To use your numbers for consistency, of the $31 I owed, $4 was use tax - as I am one of the probably few people who actually fill that out. It was low because I only moved to NJ late in the year. So, $27 income tax, $4 use tax, and $30 charitable.

Had the use tax number been large, it could have made a difference. But now I know to use $27 instead of $31 for my schedule A (again, not that I'll itemize this year).

... just when you think you actually understand a topic ... :)
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So I got an answer, but it leaves me both slightly less and slightly more confused.

The Dept of Taxation rep tells me that the 1099-G *is* for the $30 of charitable contributions that I included in my 2007 return. He says the state "considers it an overpayment". But, but... its money *I* paid *them*.

I feel more confident (I guess) that I need not include this on my return, but isn't that logical completely backwards?


This is income to be reported on your 1040 if you itemized deductions in 2007. But, I would argue that you should use the worksheet in IRS Pub. 525 to allocate part of the $30 to your 2007 state tax payments made in 2008 (any January estimate plus the amount paid with your return) and part to line 10 of Form 1040. The part allocated to 2008 is entered as a reduction of state taxes paid on Schedule A.
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