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State return required for prev yr state tax refund?

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    State return required for prev yr state tax refund?

    Most states that I deal with don't tax state income tax refunds issued by that state and no income tax return is required if that is the only income.

    Had a new client last year that had a VT state income tax refund from 2013. Preliminary research shows that VT does not provide an adjustment for state income tax refunds, so I should have filed a 2014 VT tax return for this person. Quick estimate shows a tax liability of $38 to VT due to the 2013 state income tax refund.

    VT is outside of my normal jurisdiction, so it didn't even occur to me that a return might be required (have never ran into a state where it was required before) and the client did not request a VT return filed or mention it until he was preparing his 2015 taxes (he's a DIYer, he only hired it out last year due to stock options he exercised and sold).

    What's my responsibility? File the VT return for free? Pay any penalties on the $38 balance that is now late? There's no way I can do this before the tax deadline this year (he will probably be mad that he has to file an extension). Does that make me responsible for any interest or penalties if they owe taxes on their 2015 taxes, since they have to extend due to my failure to file a VT tax return last year?

    I did not need this right now... Since they are no longer a paying client, I think I'm going to respond that I can't answer any questions that are not related to 2015 tax returns and deal with it after tax season.

    Thanks for listening and any advice you can provide.