How do I cancel out a 1099G

I received a reimbursement of taxes I paid to the State of Maryland in

2007 for the 2006 return. The State required me to send them an amount of money which they did not have on record representing withholding from a stock sale. When I produced the data proving that the withholding took place they sent me a reimbursement of the total amount of the check I sent them. Now I received a 1099G which shows that I received a State of Maryland refund for that amount. This wasn't a refund, it was a reimbursement of overpayment. If I claim this on my 1040 it will look like income I received. How do I cancel this out?
Reply to
Mark21286
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"Mark21286" wrote

If you deducted the tax payment TO the state in the year in which you wrote the check, then the refund/reimbursement FROM the state is taxable to you in the year you received it.

If you did not deduct that payment (but maybe deducted other state taxes) then that refund is not included in your income at all.

Reply to
Paul Thomas, CPA

That's the definition of a tax refund. The reason for the overpayment (excess withholding versus sending a tax payment that the state asks for) is irrelevant. If you deducted the overpayment, you have to pay tax on the reimbursement to balance things out.

Reply to
Barry Margolin

True, but if you were subject to the itemized deduction phaseout, or to AMT, then the computation is more difficult. The instructions for line 10 give about 10 reasons why you should use the more complicated computations (phaseout and AMT are just two of them).

Reply to
removeps-groups

I'm confused!!! I sold stock; the brokerage took withholding from the sale of the stock which I assumed would mean that the State of Maryland received the info. The IRS received the withholding information. Then I got a letter from the State stating they received information from the Feds that I had this income but never paid taxes to the State on it. I was told that I had to pay taxes on it immediately and file for a review to the State with any documentation I had. I sent them a check for the amount they said I owed and after a few weeks, after I produced documentation proving I had already paid taxes on it, they sent me a check for the total amount. Then I received a 1099G stating this was income I received from the State. I just want to know where on my 1040 or State taxes I enter this 1099G information so I don't pay taxes on it again. I'm using TurboTax and can't figure out where to enter it. When I enter it as a State 1099G refund my total tax bill goes way up!!

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Reply to
Mark21286

Mark, you got three answers to your question. What is it that you don't understand? If you didn't deduct the refund (the check you wrote in response to the notice, not the amount that was originally withheld) on your federal income tax return, you don't have to pay tax on the refund. It's that simple. You can put the 1099G in your file in case any question ever comes up, but you don't have to include the amount anywhere on your federal income tax return.

Maryland does not allow any deduction for state income taxes. Therefore a refund of state income taxes is not income for Maryland purposes.

Katie in San Diego

Reply to
Katie

Did you deduct that amount on your Federal Income Tax form for the year in which you paid it? That's the key question.

If you didn't deduct it, the refund isn't taxable, just ignore it (but keep records in case they ask about it).

If you deducted it, the refund may be taxable, depending on the tax benefit you got from deducting it.

If the payment and refund both occurred in the same calendar year, you can either deduct the payment and enter the refund, or ignore both of them.

Seth

Reply to
Seth

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