North Carolina Mess

[Burke]

Suggest you peruse page 22, right column ("Recovery for 2 or more years") of IRS Publication 525 ( http://www.irs.gov/pub/irs-pdf/p525.pdf ).

The example shown on pages 22/23 seems reasonably on point, at least to me, as it appears to address the issue of determining taxability of a state refund when state estimated payments for year 20xx were made in more than one calendar year. The IRS instructions even state the need to attach a statement to show why the line 10 amount on Form 1040 is less than that shown on the Form 1099-G. FE

Well now, the fact that state estimated payments might have been made in different years,
could have an impact. For this and deductibility reasons, I always tell my clients to make that last payment in December. I even change the date due on the record sheet I print to show 12/15/XX.

[FEDUKE404]

Band-aid approach

Well now, the fact that state estimated payments might have been made in different years, could have an impact. For this and deductibility reasons, I always tell my clients to make that last payment in December. I even change the date due on the record sheet I print to show 12/15/XX.

Very interesting....

I never tell my clients when to prepay any payment, much less modify the actual payment due date.

I inform my clients that they may wish to prepay the #4 state estimated payment, with the underlying issue being a (possible) current deduction versus a next-year deduction. (I also tell them of related timing issues re end-of-year property tax payments and contributions and medical payments.)

In certain instances, from a tax standpoint it would NOT be prudent to pay such prior to 12/31/201x.

But the client always makes such decisions.

And, of course, none of this should have anything to do with how to properly determine the taxability of a state refund. Well, perhaps if you want the tail to wag the dog, I suppose.

FE