Tax Reporting Quandary: Do Local and State Tax Refunds Need to be Reported to the IRS?

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Every year during tax season, taxpayers who have paid their taxes typically receive a portion of their money back that was written off. 

Tax refunds are frequently significant for those who accurately file their state and local taxes. However, many people continue to fail to take advantage of this because they lack the necessary skills to file their taxes correctly. 

People frequently enquire as to whether they must file their taxes with the Internal Revenue Service (IRS) on a local and state level. 

We will provide you with comprehensive information about how to receive your tax refund in your town. First off, if you claim a refund of local or state taxes, you may receive Form 1099-G.

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What Happens to My Refund if I Receive the 1099-G Form?

tax-reporting-quandary-do-local-and-state-tax-refunds-need-to-be-reported-to-the-irs
Every year during tax season, taxpayers who have paid their taxes typically receive a portion of their money back that was written off.

It is not always the case that a state or local tax refund you report will result in this Form 1099-G being sent to you. 

Your state or local refund is unquestionably taxable if you included the state or local income taxes you paid on your last year’s return as an itemized deduction. However, there are more situations in which your taxes can be lowered. 

The difference between the standard deduction for your filing status and the itemized deductions you claimed last year may lower the portion of your return that is subject to taxes. 

To find out more, visit the IRS’s official website. To get Publication 17: Your Federal Income Tax, simply click on the ‘Other Income’ section. You must include any refunds or credits you receive for state or local income taxes in your income for the year in which they are received, regardless of when you paid the taxes. 

Included in this are refunds for taxes that were excessively withheld. Please refrain from including the refund in your income if you did not itemize your deductions the prior year.

 

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