Comments on: Is My State Tax Refund Taxable and Why?

By: DoubleTaxation101

DoubleTaxation101 — Tue, 16 Apr 2013 01:32:14 +0000

I don’t understand why state tax refunds should be taxable. Here’s what happens:
- In year 1, you OVERestimate the amount of taxes, so you give the IRS more money that you should. This money is already being taxed because it’s part of the reported income.
- In year 2, you get back the portion you OVERpaid and that the IRS had in its possession and made use of.
- Then, you get taxed on that refund which was money already taxed in year 1, and that you didn’t even get to have and use. You had to overpay because you get penalized if you underpay.
Something is very very wrong here. To summarize:
- If you overestimate tax payment, you get penalized (double taxed).
- If you underestimate tax payment, you get penalized (actual fee).
- There is no way to predict the EXACT amount of taxes due. If there is one, the IRS should tell us what it is.
What’s a taxpayer to do? Why can’t they change these ridiculous tax codes to make them simpler and fairer? This makes the IRS look like crooks.

By: MARTIE moline

MARTIE moline — Thu, 21 Feb 2013 17:25:36 +0000

Taxable refund that you received no form for

By: MARTIE moline

MARTIE moline — Thu, 21 Feb 2013 17:23:00 +0000

I understand that the state refund is taxable, but the line underneath it, the Cca refund saying that I received 6000 dollars is beyond comprehension

By: MARTIE moline

MARTIE moline — Thu, 21 Feb 2013 17:19:22 +0000

Coca refund. What is this

By: TurboTaxLee

TurboTaxLee — Wed, 17 Mar 2010 01:23:55 +0000

Hi Don, Check out the latest version of IRS Pub 525. The last paragraph on page 22 is an example that talks about making payments over two years for the same tax return…. hope this helps.

By: Don

Don — Fri, 05 Mar 2010 18:51:39 +0000

Your tip applies to my 2009 return because some of my 2008 state tax was refunded. TT reduces my 1040 line 10 amount because some of my 2008 state tax payment was made in 2009. Is that kosher? Another tax program puts the full amount of the refund on line 10. I don’t see that IRS Pub 525 p. 23 allows a reduction because some payment was in 2009, but maybe I’m misreading it.