mistake in last year's deduction, wait for amend accepted first or not?

Question

I was doing 2006 tax and found out in 2005 I deducted too much on a certain item should have belongs to 2006 deduction. It is simple to work out the extra tax liability and no ambiguity that I can think of. Therefore for 2005 I received slightly too big of a refund,

1040X and 540X was prepared and I am ready to mail it in, with 2 checks for the balance owe. However, the 2005 state tax refund counts as income for my
2006 federal, and a 1099-G to remind you of this amount. But this amount has changed as the result of above mistake. I have almost completed my 2006 return now and wanting to file it soon, I THINK the right thing to do is go ahead and put in the amended amount as stated in this 540X so the 2006 gross income is properly adjusted. Will the IRS or State think I made a mistake and reject my return because they have not received my 1040X and 540X yet, and assume that I didn't report the state tax refund amount in the current
1099-G. Thanks in advance!

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Bob Sandler · Accepted Answer

No, it didn't. The amount that you received in 2006 did not change.

That's not the way to handle it. On your federal return for

2006 you report the amount that you actually received in 2006, which is the amount on the 1099-G. On your federal return for 2007 you will deduct the additional state payment that you are making now, in 2007.

As a general rule, you report income and deductions in the year they actually occur.

Bob Sandler

Phil Marti · Answer

No, it hasn't. 2006 is over, so anything that happens now won't affect your 2006 return.

No, it will be rejected because it's wrong. The payment that you're making on the 2005 state amended return will be a deduction on your 2007 return.

-- Phil Marti Clarksburg, MD

jj3000 · Answer

Thank you for your replies. I don't know why I didn't think of it this way. That was simple. Question for 2007,

As I mentioned I will be mailing 2 checks that I now owe (for 2005 federal and state) along with the 1040X and 540X respectively. So when I do the 2007 return next year, Do I have to keep track of these payments myself and add it into schedule A the line where it says "state and local tax"? Or will I get a slip/form that will remind me of this amount. I ONLY need to keep track the state tax payment caused by this amendment, is this correct? The federal tax is paid and that's the end of story? Thanks!!

Phil Marti · Answer

You need to remember it.  There won't be any reminder notice.Correct--Phil MartiClarksburg, MD

Bob Sandler · Answer

You have to keep track of it yourself. You will not get aform. That's correct.Bob Sandler

mistake in last year's deduction, wait for amend accepted first or not?

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