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NYS 1099G

Taxpayer gives me a 1099G from NYS for 2005 overpayment received in 2006. So, I check the 1099G to the 2005 tax return. The NY return (IT203) had a balance due. I notice the amount on the 1099G matches line 71 of form IT203. That line is penalty for underpayment of estimated tax (IT2105.9) It appears that NYS is reporting the penalty for underpayment of estimated tax as a tax refund. There is no taxable income to report. The 1099G is erroneous. So, I call the phone # on the back of the 1099G. After being on hold for about 45 min, I finally am able to get through to a supervisor who could do nothing more than a bureauocratic it's right because we did it & we did it because it`s right & if you don't like it go call someone else. It appears that the way NY process tax returns is that they take your full payment and applied it to the taxes, generating an overpayment that was then applied to the pay the penalty. It's this phantom overpayment thats reported on the 1099G. That would make it a systemic problem. This could cause the IRS to send out notices for mismatches on the 1099G's. Anyone else see this?

Reply to
Benjamin Yazersky CPA
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No, I file IT-201 instead of IT-203 and my 1099-G is correct, but .... as you probably know the amount reported by NY on the 1099-G differs from the actual overpayment shown on Line 74 of IT-201 by the amount of the Sales and Use Tax entered on Line 68 of IT-201 plus any Voluntary Contributions listed on Line 60, again of IT-201. The fact that the Sales and Use Tax line causes the overpayment reported on the 1099-G to be different than the Overpayment shown on the tax return is causes a lot of confusion for NY taxpayers and must generate thousands of telephone calls claiming that the 1099-G is incorrect. Perhaps the person you spoke with was just overwhelmed by all the calls regarding this other 1099-G issue.

-- Vic Roberts Replace xxx with vdr in e-mail address.

Reply to
Victor Roberts

I believe NY is absolutely correct about that. The penalty is NOT deductible, so if a penalty reduces a refund, it is the GROSS refund that is potentially taxable. If there is a balance due that is less than the penalty, then the refund which would have been received, absent the penalty, is taxable. You need to ignore the penalty to calculate what the "income tax" refund is. Similarly, if you pay a use tax on your NYS return, that use tax reduces the cash refund, but does not reduce the taxable refund.

-- Bruce E. Cobern, CPA mailto: snipped-for-privacy@pipeline.com

Reply to
Bruce E. Cobern

I don't see it because I have no New York clients at present. However Noo Yawk's department of revenue did announce that all those 1099's were wrong and they're sending out new ones. When in doubt of course, use the actual amount shown on client's last year's return. ChEAr$, Harlan Lunsford, EA n LA

Reply to
Harlan Lunsford

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