Another NY confusion question or two

[FEDUKE404]

Client finally obtained (online) 2009 Form 1099-G for NY state tax refund.

The number shown is "correct" (I have the 2008 tax returns) but does not include the additional $200 education credit that was part of the state refund.

While I understand the "how" of where the amount shown on the Form 1099-G originated, I don't quite understand the "why" as to the reason that amount is not included AND therefore not reported to the IRS.

Did I sleep through that session of tax class? With enough of the correct type of Sch A itemized deductions, the entire refund (NY version + refundable credit) is taxable on 2009 Form 1040, line 10, right??

Along a similar line, will NY mail out 2009 Form 1099-G for unemployment benefits, or will those also be available only online at a later date?

Thanks for your help!

FE

[BOB W]

Client finally obtained (online) 2009 Form 1099-G for NY state tax refund.

The number shown is "correct" (I have the 2008 tax returns) but does not include the additional $200 education credit that was part of the state refund.

While I understand the "how" of where the amount shown on the Form 1099-G originated, I don't quite understand the "why" as to the reason that amount is not included AND therefore not reported to the IRS.

Did I sleep through that session of tax class? With enough of the correct type of Sch A itemized deductions, the entire refund (NY version + refundable credit) is taxable on 2009 Form 1040, line 10, right??

Along a similar line, will NY mail out 2009 Form 1099-G for unemployment benefits, or will those also be available only online at a later date?

Thanks for your help!

FE

NYS views a tax credit as not part of the NYS refund that is taxable on the federal return because it is not a refund of taxes. I'm happy and my clients are happy> this is good. Go with the flow. Also, tax credits were never deducted like income taxes on the Federal Schedule A so there is no recovery to income from excess deductions in the prior year. Using this logic, no state tax credits should be part of federal taxable state refunds.

So when you pick up a new client don't just take their state return and plug in the refund shown. Review all the issues that are part of that refund.

I hope they are mailing UI 1099Gs because the unemployed clients have enough on their mind already, let alone when they received their first check (act date), when it stopped (act date), did they elect withholding and how much each check was (let alone what was the gross).

[FEDUKE404]

Creative reporting to say the least

BOB W - Intriguing approach to things...use what is shown on the Form 1099-G for refunds and not the actual "refunded amount" shown on the prior year NY Form IT-201.

I am amending one NY return merely to claim education credits (yes, client meets the more stringent NY requirements for such).

So you are saying that is "free" money, exclusive of any interest payments added on, to the IRS as there would/will be no Form 1099-G for that state "refund" ??

It can get interesting for another tax year where I am amending NY (and US) for Form 1040 Sch A issues and NY only missing education credit.

As for the unemployment question, the information is currently available on the NY website, but it only shows unemployment and "taxes." Without the Form 1099-G that would be a rough guess - federal and/or NY tax withholding amounts are unknown.

Thanks for the input. I'm sure my NY client will be happier with the smaller "taxable" state refund for 2009!!

FE

[dtlee]

I agree with what Bob W wrote.

I quantify the New York 1099-G amount as "state and local tax deposits minus state and local liabilities." Nonrefundable credits ARE included in the refund amount (since they are used to compute the liability), but refundable credits are not. Also included in the refund are any Use Tax payments paid with the tax return and any amounts contributed to the various charitable groups allowed on the New York return. However, if you skip all of those lines and stick with "state and local tax deposits minus state and local liabilities" I think the computation is much simpler. Also note that the fourth estimated tax payment, if paid in January is not included in the 1099-G amount.

I will ask this here (last time I asked this, it was quite the subject of ridicule), since it seems appropriate:

I understand why the Federal Earned Income Credit is not taxable and I have seen the reference in the code that makes it nontaxable. As you have seen from Bob W's post and mine, the New York State Earned Income Credit is not included as part of the taxable refund. I have never included it as part of taxable income or as part of the recovery of previously deducted taxes. Under what federal statute is this payment from New York nontaxable income?

[BOB W]

I agree with what Bob W wrote.

I quantify the New York 1099-G amount as "state and local tax deposits minus state and local liabilities." Nonrefundable credits ARE included in the refund amount (since they are used to compute the liability), but refundable credits are not. Also included in the refund are any Use Tax payments paid with the tax return and any amounts contributed to the various charitable groups allowed on the New York return. However, if you skip all of those lines and stick with "state and local tax deposits minus state and local liabilities" I think the computation is much simpler. Also note that the fourth estimated tax payment, if paid in January is not included in the 1099-G amount.

I will ask this here (last time I asked this, it was quite the subject of ridicule), since it seems appropriate:

I understand why the Federal Earned Income Credit is not taxable and I have seen the reference in the code that makes it nontaxable. As you have seen from Bob W's post and mine, the New York State Earned Income Credit is not included as part of the taxable refund. I have never included it as part of taxable income or as part of the recovery of previously deducted taxes. Under what federal statute is this payment from New York nontaxable income?

Doug, I have no clue, but it seems that most, if not all, credits (federal or state) are tax free monies. Federal does not tax you on their issued tax credits so why would federal or state tax them no matter where they came from..

Doug, I must be down the block from you..................????? Hi neighbor..............

[dtlee]

Doug, I have no clue, but it seems that most, if not all, credits (federal or state) are tax free monies. Federal does not tax you on their issued tax credits so why would federal or state tax them no matter where they came from..

Doug, I must be down the block from you..................????? Hi neighbor..............

Howdy, Neighbor.

I was thinking that it might fall under the welfare type payments from the state, but then there are also state Child Tax Credits which are not part of taxable income but not part of the refund.

Your reasoning makes sense, but I have never found any basis for treating this as nontaxable income except...well...we all know it isn't taxable.

I do recall finding something that indicated that refundable federal credits were not includable in taxable income. I never found anything regarding equivalent state payments.

Next time you post, wave so I can see you, neighbor.

[Uncle Sam]

Ny 1099g

From the NYS Tax Department:

Form 1099-G, Statement for Recipients of State Income Tax Refunds from the
New York State Department of Taxation and Finance is now available
electronically. We will no longer mail Form 1099-G statements to taxpayers
beginning this filing season. By supplying this information
electronically, we will save approximately $700,000.

Taxpayers who need to know their 2008 New York State refund amounts to
complete federal returns can:
- check their records
- get the form online, using our 1099-G online service
- call (518) 485-0799 (in-state callers without free long distance call
1 866 698-2946)

See: http://tax.state.ny.us/pit/1099g.htm

[FEDUKE404]

NY Form 1099-G updated

From the NYS Tax Department:

Form 1099-G, Statement for Recipients of State Income Tax Refunds from the
New York State Department of Taxation and Finance is now available
electronically. We will no longer mail Form 1099-G statements to taxpayers
beginning this filing season. By supplying this information
electronically, we will save approximately $700,000.

Taxpayers who need to know their 2008 New York State refund amounts to
complete federal returns can:
- check their records
- get the form online, using our 1099-G online service
- call (518) 485-0799 (in-state callers without free long distance call
1 866 698-2946)

See: http://tax.state.ny.us/pit/1099g.htm

I received the same message earlier today.

BTW: The web site they listed is wrong

....but this one works: http://www.tax.state.ny.us/pit/1099g.htm

FE