Predicting 1099-G Amounts

[dtlee]

I have a question for those of you who may have an insight as to how your particular state reports information on a 1099-G. I have a recurring disagreement with a software vendor who claims that New York State is not following federal rules for computing their 1099-G amounts and that their software computes what should be on the 1099-G based on federal publication 525 (which in no way was intended for that purpose, but that is another issue).

When New York State computes the 1099-G amount, it computes it as total deposits for the year in question minus the total liability for the year in question. Thus, deposits are reduced by any computed tax reduced by nonrefundable credits such as the household credit. New York State does not include refundable credits in their 1099-G amount since they do not consider it a recovery of a previously deductible amount.

Thus, if you paid in $4,500 in withholding and have a net liability (described earlier) of $3,500, your 1099-G amount will be $1,000 even though you may have refundable credits which result in your receiving a check for $5,000 (i.e., more than you paid in).

Does anyone know how other states handle these refundable credits? Are they included on the 1099-G amount?

Thanks.

[Mike Mac]

In MN

Refundable credits are not included in the total on MN's 1099-G's.

Also in MN the only time they actually mail out a 1099-G is when a tax payer had a refundable credit as part of their refund. All others need to look up the amount on the Dept of Revenue's website.

[taxea]

Does your state program, perhaps, move the difference to another form or have a worksheet that it automatically does? Or is your meaning that the 1099-G is issued by the state to the taxpayer with the deductible amount not included in box 1?

[dtlee]

Does your state program, perhaps, move the difference to another form or have a worksheet that it automatically does?

Actually, yes. They consider that any refundable credits (up to the net liability after applying estimates and withholding) are part of the recovery of previously deducted amounts. Part of the issue is that while they consider refundable credits to be part of the refund, New York State does not. Thus, they start their computation of the amount of the "refund" which means what I posted in the original post to them, but means the net check amount to the software vendor.

[BOB W]

Does your state program, perhaps, move the difference to another form or have a worksheet that it automatically does?

My program makes the computation automatically and I have, in the past, just compared and it was always right on. So I'm just going to go with my tax program and move on. Of course, new clients are a different issue.

[dtlee]

My program makes the computation automatically and I have, in the past, just compared and it was always right on. So I'm just going to go with my tax program and move on. Of course, new clients are a different issue.

Would you mind sharing which software that is?

I am using Drake and though they were "spot on" in their computations in the 2007 software, they apparently changed their computation in response to some information they received from the IRS. They claim the IRS dictates that refundable credits are part of the refund (in other words, they claim the NY 1099-G is incorrect....you know where I stand on that).

[BOB W]

Would you mind sharing which software that is?

I am using Drake and though they were "spot on" in their computations in the 2007 software, they apparently changed their computation in response to some information they received from the IRS. They claim the IRS dictates that refundable credits are part of the refund (in other words, they claim the NY 1099-G is incorrect....you know where I stand on that).

Creative Solutions' Ultra Tax. I been using them for 5 years now>>> ouch! $ but worth it.

[MAJ]

Predicting 1099-G Amounts

NY is NOT sending out 1099-G notices this year.
You get to log on look up the amounts.
Now we all know the taxpayer isn't doing that & it'll be up to us to find out the information.

That brings up a question: How do you treat unprepared clients?
No 1099-G (to no fault of their own in this case).
Forgot their 2nd mortgage paperwork or don't have their first.

I've (on numerous occasions) have had the client log into their mortgage companies web site to obtain the correct information while preparing the return. In some cases we've had to go through the process of creating the account on the fly.

Do you charge extra for having to do their homework and if so are you interested in sharing your thoughts and charges for the process. Sometime it is a quick process - other times it could take 15-20 minutes.

Thanks.

[JohnH]

Most of my clients either mail their info to me or drop it off either during the day or after hours in a drop slot. I then go over it and call them or send an email advising them of anything they missed or any other info I need. It's their responsibility to get the remaining info together and send or deliver to me. If ther is a situation requiring me to do some of their information-gathering, I do charge extra for that time. If they delay or have trouble finding what's needed, we file an extension on anything still in-house & incomplete beginning around mid-March.

I consider having a client sitting in my office a colossal waste of time and an impediment to getting real work done. We all have different operational methods and my philosophy won't work for everyone, but I do everything possible to keep clients out of my office and out of my hair so I can get some work accomplished.

[Snaggletooth]

Use Worksheet

If a state includes non-refundable credits in their 1099-G, simply use the State Income
Refund worksheet to weed out these amounts. These things should not have been taxable, as the taxability should have be limited to the amount deductible.

[Lion]

Send the client home to do their homework

I do prefer the client here for an interview, but more and more are mailing, dropping off, etc. And, I seldom prepare their return while they sit here. I send them home with a list of missing items (after we discuss 2009 and suggestions for 2010). However, I've already bookmarked the NY site and will probably print out for each client before their appointment or when I receive their other documents for this season. Maybe, I'll try to educate them to do it themselves next season. I try to make their price reflect my full work for them and not just the tax return, so I don't feel used. If I'm doing things for them during the year, I'll increase next year's price to reflect it.

[Lion]

Ps

I should probably mention that I'm in CT, so have only a few (enough to register and pay the blasted $100) NY commuters and residents. So, I won't be looking up very many NY 1099-Gs.

[taxea]

I work the same way JohnH does. It is much more convenient for the client and I get so much more done. I have found over the years that clients almost never have all their paperwork even after having given them a very detailed checklist. And I do charge them if I have to do their research.
Last year I instructed them not to give me their documents until they had obtained all of them. Leaves less on hold in my office.
It is amazing how much time you save when you train your clients.

[dtlee]

If a state includes non-refundable credits in their 1099-G, simply use the State Income
Refund worksheet to weed out these amounts. These things should not have been taxable, as the taxability should have be limited to the amount deductible.

I would think that non refundable credits are used to compute the tax liability and should be considered part of the recovery of taxes paid (and potentially deducted).

Do you have a cite that would say that non-refundable credits are not considered part of the tax refund?

For that matter, do you have a cite that says that refundable credits are not considered taxable income to the recipient?