Reporting of state tax refund (1099-G) on Federal taxes

[c***@yahoo.com]

In 2006, I received a small refund from California FTB for
the 2005 state income taxes. In my federal filing for 2005,
I had used schedule A (itemized deductions).

Therefore, normally, the state tax refund would be
considered income for 2006. I have received 1099G, and
normally this would be reported on line 10 of federal 1040.

However, in 2005, I was subject to a huge AMT (and even
huger for 2006 :(). As such, I did NOT get any benefit from
a large chunk of state income tax. I followed pub 525, and
basically, since I did not effectively get a benefit on my
2005 federal taxes filed in 2006, I do not have to report
the amount from 1099G on my 2006 federal taxes on line 10.

OK, that's good.

But where and how do I explain the reason? I do not want IRS
computers going bonkers -- California FTB would tell IRS
computers that I was issued a 1099G, and IRS computers will
not find any entry on line 10 of my 1040. So, some database
comparison, and voila, I would get unwanted letters from
IRS! I know this can be explained at that time, but I would
rather explain it upfront.

So, how do I do it? Do I leave line 10 blank, or do I enter
0.00, which might indicate that a 1099G was issued, uit
includbile amount is zero?

Thanks for your help and suggestions!

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[Phil Marti]

Post by c***@yahoo.com
I followed pub 525, and
basically, since I did not effectively get a benefit on my
2005 federal taxes filed in 2006, I do not have to report
the amount from 1099G on my 2006 federal taxes on line 10.
OK, that's good.
But where and how do I explain the reason?

You don't.

--
Phil Marti
Clarksburg, MD

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

[okietax]

Just because you are issued a 1099-G does not mean it is
taxable. Anyone who receives a state refund receives the
1099-G, but not all who receive the refund deducted their
state taxes. Not everyone itemizes, in fact many people do
not who should. You do not need to issue an explanation.
There will be no cross reference.

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>