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OT: federal tax question

G

Gun guru

Well-known Member
Is it true that if you recieve say $1000 on your federal tax return that same $1000 goes on your income for next year. And then you would have to pay taxes on that $1000. Is this true?
 

I'm going to step into areas I know little about here, math and taxes, but if you are talking about a refund from taxes that have already been withheld rom your salary, I don't see how it can be considered income.Taxes have been withheld from your income but it turns out at the end of the year you did not owe that much in taxes, so the extra that the government has had all year is being repaid. No additional income is being received by you.

KEH
 
If you receive a tax refund that is the end of the story. You do not have to pay tax on a refund.

Now then, if there is some sort of deferred income adjustment you may have to pay income tax on that, but it gets way to complicated to explain the circumstances when that would happen.
 
if you get a federal income ax refund,it is not taxable the next year.however a state income tax refund is income.
 
In Michigan, state income tax refunds are considered income the following year. The state even sends a W-2 or 1099. Does anyone wonder why our state's economy is so screwed up?

Larry in Michigan
 
I must have missed that one. In 30 some years of filing taxes in Michigan, never got a w2 or 1099 from the state. And no, you don't have to declare income on a state refund. The feds already got their whack at it. That money comes out before the state gets theirs. I do my own taxes.
 
Federal refunds are not taxable. If you receive a state tax refund and you itemized your deductions on the federal return, you must pick up the state tax refund as income on your federal return the next year, since you deducted as part of your itemized deductions in the prior year.
Reaver
 
No, a federal tax refund is never considered income next year. But State and Local refunds ARE income on the federal return, because those taxes were deductions (the amount withheld from your paycheck, usually) from your income last year. If you get any of the withholding back as a refund, they consider it income again.

Hope that is clear / makes sense.
 
Nope, never heard of that one. As for the state of Indiana I put down the money I received from the state the previous year but not Federal. Doesn't make sence but that's what I was told to do. But with any tax question I always check with the IRS. You mess with them and you pay dearly. I have a family member that found out the hard way.
 
If you itemized deductions last year and deducted state with holding you did not pay tax on that money so if part of it was refunded it is now subject to be taxed since it was not taxed last year.

HTH

Areo
 
Speaking of withholding, I think we should all practice a form of withholding. Withhold telling them how much corn and beans we sold or how many cattle or pigs.

Maybe a new version of the Boston tea party!!!

Gene
 
Larry, you are mistaken.

Yes, the state sends you a statement of your tax refund for the previous year. And they also send the same information to the IRS. This is a FEDERAL requirement, and has nothing to do with Michigan law.

If you don't have to declare your refund as income on your federal return (e.g. you didn't itemize the previous year), then you can ignore the notice. If you declared the refund as federal income, you SUBTRACT the amount from your federal AGI when calculating your Michigan income.

Just read the instructions that come with your Michigan tax forms, it's fairly explicit.
 
As everyone else said, you only have to declare your refund as income if:

a. You itemized in the previous year's tax return.

b. You deducted state income tax from you income the previous year.

There are a bunch of variations on this rule, but this covers 99 percent of the cases. It's actually not hard to figure out: If you avoided paying taxes on income because you made a deduction for an expense (in this case state income tax) for which you were later reimbursed, you owe taxes on that deduction. State income tax refunds are just a special case of that general rule.
 
All I want to say is Thank You for helping with the big federal deficit, just less money for me and everyone else to pay. Keep it up and you'll be as broke as eveyone else very soon.
 
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