I'm just now filing my tax returns for 2004 and 2005. I waited since I knew I had refunds coming to me. I expect to receive these refunds in 2007. Will I then have to report them as income received in 2007 and pay taxes on those refunds? I didn't think I would but a friend thinks I'll have to treat it as income since I waited too long (over 1 year)
2006-12-13 06:20:49 · 6 answers · asked by Swing K 2 in Business & Finance ➔ Taxes ➔ United States
If you itemized in 2004 or 2005 you will have taken a deduction for state taxes paid during those years on Schedule A. So a refund must be taxed. It goes on the front of form 1040 in the year the refund is actually received, as a rule. It does not matter that you are late in filing. If you had filed on time, any refunds would have been taxable in the year received.
If you did not itemize in a particular year, any refund received for that year is not taxable, as you did not receive any deduction for it.
Federal refunds are not taxable in any case.
By the way, you have given Uncle Sam an interest-free loan for almost 2 years (for 2004) and almost a year (for 2005). Late filers do not get paid interest on the refund.
2006-12-13 06:57:59 · answer #1 · answered by skip 6 · 2⤊ 0⤋
State and local tax refunds count as income only if you listed the amounts as itemized deductions when you filed federal taxes for the year they were originally paid. The fact that you're filing late doesn't change this. But you will be paying a penalty for the late filing if you owe - and if you wait too long, you wouldn't be able to collect any refunds due to you - you have three years after the return was due to file late and still collect a refund.
2006-12-13 17:35:55 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
Federal refunds are never considered income on the federal return.
State refunds are only considered income if you itemized deductions in those years.
Your friend is wrong.
2006-12-13 06:55:11 · answer #3 · answered by Wayne Z 7 · 1⤊ 0⤋
skip already gave you the best available answer. State returns are taxable if you claimed a deduction for state taxes on that years Schedule A.
2006-12-13 13:07:33 · answer #4 · answered by STEVEN F 7 · 0⤊ 0⤋
You are going to get a penlty and you might not get a refund. Always file when you are supposed to and you won't be charged a very big late fee.
2006-12-13 06:25:42 · answer #5 · answered by radar4 2 · 0⤊ 1⤋