At least for me this is. My younger brother had a situation last fall where his MN returns for 2000, 2001 and 2002 were audited. What happened was that he worked in WI for those years and his employer removed WI taxes. He was only 18 at the time and didn't understand reciprocity. Therefore he filed WI returns and received small refunds from them, when he should have filed to WI for a full refund of his state taxes, and turned around and filed MN returns and pay the tax in full to them.
That said, I ended up having to amend his WI and MN returns for those 3 years and he was assessed penalties and interest due by MN on the state taxes owed. The amount of state tax for the 3 years was around $2200. With penalties and interest, all amounted to around $2800. He paid the debt in full last November (2005).
My question is, is he able to deduct the amount of state taxes paid for those 3 years (the $2200) on his itemized deductions, as state tax paid on his 2005 Federal 1040? Or is it lost to him as a deduction? He only began qualifying for itemizing in 2004 when he got his first home; prior to that he usually filed EZ returns, or Telefile. I know the penalties and interest are not deductible, but wasn't sure about the state tax.
Thanks for your input.
That said, I ended up having to amend his WI and MN returns for those 3 years and he was assessed penalties and interest due by MN on the state taxes owed. The amount of state tax for the 3 years was around $2200. With penalties and interest, all amounted to around $2800. He paid the debt in full last November (2005).
My question is, is he able to deduct the amount of state taxes paid for those 3 years (the $2200) on his itemized deductions, as state tax paid on his 2005 Federal 1040? Or is it lost to him as a deduction? He only began qualifying for itemizing in 2004 when he got his first home; prior to that he usually filed EZ returns, or Telefile. I know the penalties and interest are not deductible, but wasn't sure about the state tax.
Thanks for your input.
Comment