Should I amend my FEDERAL return to report the local income tax refund of $22.00?

Question

My wife and I filed our 2006 Federal income tax returns two months ago. We recently filed our local income tax returns and got a unexpected $22.00 return that we had not reported on our Federal return. The local authority issued us a 1099-G that stated this income is being reported to the IRS for tax year 2006 (not 2007).

Should we go through the hassle of amending our 2006 returns for this small amount, or should we wait to see if the IRS sends us correspondence asking us to pay the tax on the $22.00?

Thanks,

Folks - the $22 says for tax year 2006. This is all for 2006, not 2005 or 2007.

We itemized our Federal returns and got back about $3,200.

Answer 1

If you just got the money in 2007 when you filed your local return, it sounds like they screwed up b issuing the 1099-G for tax year 2006 - it should have been 2007, and you should have gotten it in early 2008, not now. States are pretty good at understanding the rules, locals are sometimes but can be real confused, especially if it's a small municipality. Did you ask them about that? Maybe they can correct it.

If they don't correct it, then you should probably file an amended return itemizing only the net taxes paid, taking out the $22. Frankly at this point, I'd probably just let it go and see if I heard from the IRS. If early next year, you get yet another 1099-G from these same people, then claim it on your 2007 return.

Depending on your tax bracket, you'r talking a couple dollars here, $8 at most, so isn't worth a lot of trouble to correct what is actually someone ELSE's mistake.

Note that this answer is based more on practicality than on legality. The worst that would happen, though, is that you pay a few dollars extra in tax.

Answer 2

You received a refund of $22 for a prior tax year (probably 2005). Did you itemize in 2005? If so, then some or all of the $22 is taxable in the year you received the refund, 2006.

If you itemized for the year of the refund, the correct answer is to amend the return and add the taxable amount of the $22 refund to your income. In fact, no additional tax may be owed since the tax tables go in increments of $50.

I would leave it alone since it is such a minimal amount. If you get a letter about this tiny additional tax, just pay what the letter says and be done with it.

Answer 3

If you received a 1099-G, the refund is for the 2005 tax year and was refunded in 2006. A refund for the 2006 tax year and refunded in 2007 will not result in a 1099-G until next year. In you did not claim state income tax payments as an itemized deduction on your 2005 Federal tax return, you don't need to include the refund on your 2006 Federal income tax return. If you did claim the deduction on your 2005 return, you would be required to claim it even if it was only $1.00. Most states would issue a refund for less than $1.00. You are always better off amending your return yourself than waiting for the IRS to find you.

Answer 4

If you itemized deductions on your 2005 Federal tax return and took a deduction for state income taxes paid, that reufnd is taxable income for tax year 2006. In this case, sadly you will need to go through the hassle of amending your 2006 return.

If you did not itemize in 2005 or if you did but didn't take a deduction for state income taxes paid, the refund is not taxable income for 2006. In this case, no amended return is required.

State tax refunds received in 2006 apply to tax year 2005 returns so how you filed your 2005 return is what matters.

Answer 5

Did you itemize your deductions in the year the refund was for? If not, your local tax return is not taxable in 2006 because you paid the taxes in 2005 or an earlier year, just ignore it. If you itemized then you should amend your return.

Answer 6

Even though it is a very small amount of money, I would amend the 2006 tax return to show the refund you received.

Better to be safe than sorry.

Answer 7

Did you itemize your state taxes on your 2006 return? If yes, the refund can be income on your 2008 return.

Answer 8

If you itemized your deductions (state) and received a refund there is a worksheet you can do to see if that refund is taxable on your Federal return. If it is,, file a 1040X and pay the extra couple of bucks. If you did not use itemized deduction on your state tax in 2005 you owe no tax on the refund and should do nothing.

Answer 9

Even though the refund is for tax year 2006, you received the refund in 2007.

You will need to recapture the tax refund on your 2007 tax return. It will be on line 10, where taxable refunds will go.

Answer 10

Will the $22 affect the amount of taxes owed?

If not, file it as income carry over next year (at least you will have reported it albeit late), if it will then use your own judgement.

I would not amend my taxes for such a small amount. If you can show that you did not recieve the notification 1099-G unitl after you file taxes for this year, and you do claim the income next year, you will be safe.