Year end Taxes?

Question

Explain to me why the goverment taxes us on income earned for a year and then after we get a refund we have to claim it on the next yeras taxes? That seems like I am being taxed twice for the same income.

Answer 1

They don't. You don't claim federal income taxes as a deduction in the first place, or as income if you get a refund.

On state and local income taxes, you can claim that as a deduction if you itemize. Then if you get some of that money refunded for the year, you have to claim the refund the following year as income to make up for over-deducting the previous year. If you get a refund from state or local taxes but didn't take that as an itemized deduction the previous year, you don't claim the refund as income the next year.

Answer 2

You only claim a refund on the next years taxes for state and local tax refunds if you itemize or do long form for you 1040 Federal income tax. If you don't itemize and just use the standard deduction then you will not have to claim the state or local refunds.

It is just a formula that the IRS has made and you have no choice in the matter.

Answer 3

This is NOT double taxation. It only applies to STATE income tax refunds and ONLY if you itemized deductions on your Federal return the prior year.

If you itemize deductions and take a deduction for STATE income taxes paid then the refund is taxable income NEXT year. You got a deduction that was larger than the actual tax liability so the refund IS taxable income.

If you don't itemize deductions, the state refund is NOT taxable income. If you itemized deductions and didn't take a deduction for state income taxes, the state refund is NOT taxable income.

Answer 4

You dont claim refunds on next years income.