If you entered a state tax refund reported in Box 2 of Form 1099-G and don't see it on your Form 1040, that's often normal.
Whether a state refund is taxable depends largely on how you filed your federal return the previous year.
If You Claimed the Standard Deduction Last Year
If you used the standard deduction on your prior-year federal return, your state tax refund is generally not taxable.
Because it's not taxable, the amount will not appear as income on your current federal return.
This is the most common reason taxpayers don't see their 1099-G state refund reflected on Form 1040.
If You Itemized Deductions Last Year
If you itemized deductions on your prior-year federal return, some or all of your state refund may be taxable.
This happens because you may have received a tax benefit from deducting state income taxes in the prior year. When those taxes are later refunded to you, the IRS may require you to include part of the refund in income.
The program automatically calculates the taxable portion using the IRS worksheet and your prior-year information.
What If My Refund Was Used to Pay Another Debt?
You should still enter the amount shown in Box 2 of Form 1099-G, even if:
- The refund was applied to back taxes,
- The refund was offset for child support,
- The refund was used to pay a government debt, or
- You never actually received the refund check.
The IRS considers the refund issued to you, even when it is applied to an outstanding obligation.
How Does the Program Determine Taxability?
The program uses information from:
- Your prior-year tax return,
- Whether you itemized deductions,
- The state refund amount reported on Form 1099-G, and
- The IRS worksheet for taxable state and local tax refunds.
If you filed your previous-year return using the same account, the program may automatically transfer the information needed to make this calculation.
Where Do I Enter Form 1099-G Box 2?
To enter your state tax refund:
- Go to Federal
- Select Income (Select My Forms)
- Choose 1099-G Box 2
Before You File
If your state refund isn't appearing on Form 1040, first check whether you claimed the standard deduction in the previous year. In many cases, that alone explains why no taxable income is being generated. As long as you've entered the Form 1099-G information correctly, the program will determine whether any portion of the refund needs to be included on your federal return.
Additional Information
Within the 1040 Instructions is the worksheet used to figure if the refund is taxable on line 1 of Schedule 1 of the 1040 form.