Conflict >irs And Nys

[BOB W]

In NYS a part of the real estate taxes are refunded under what is called a "Star Rebate" program. NYS published the way they want it handled> by netting it against the current year's RE taxes claimed on schedule A. IRS (usually) requires that any refund of previously deducted expenses be reported on line 21.


Does the fact that NYS states the way they want it handled override IRS posistion?

[sea-tax]

bobw i am shooting from the hip here but, I would say no. The IRS is a federal agency governed by federal law, and Nys is a state agency governed by state law. I don't believe that either one really cares what the other think or wants. You should file the returns based on the respective agencies guidelines. At least if it were me, I would report it on the NYS return as they request and on the Fed as they would like it.

[DonPriebe]

In NYS a part of the real estate taxes are refunded under what is called a "Star Rebate" program. NYS published the way they want it handled by netting it against the current year's RE taxes claimed on schedule A. IRS (usually) requires that any refund of previously deducted expenses be reported on line 21.

Does the fact that NYS states the way they want it handled override IRS posistion?

The NY position is consistent with the IRS instructions. The STAR rebate is purportedly a partial refund of the CURRENT year's property taxes, not of the previous years. For example, the STAR rebate check I received on October 17 2008 was a partial refund of the school taxes I paid on October 4 2008. Therefore they are netted on the return due April 15 2009.

A critic might question if the STAR rebate is actually a partial refund of property taxes, since the amount of the rebate is a function of the county, township, school district and prior income of the taxpayer, but NOT a function of the value of the house or the property taxes actually paid. They might also ask why NY sends out checks instead of just reducing the taxes. Perhaps there is some political advantage to sending out 'free money' right before the elections.