I’m working on my taxes a little this evening and I just got to the part where I have to declare my previous year’s refunds as income.
Let me get this straight: in the previous year, the government taxed me in excess of what it should and the process of returning that interest-free loan to me is regarded as income on the current year?
I can’t claim surprise because I believe this has been the case for some time and also we’re talking about the IRS, which isn’t a paragon of rationality or anything. It’s just such an obvious swindle that I’m simply outraged by it.
So, I *assume* you are talking about having to claim your state refund on your federal taxes. You’re only paying (federal) taxes on that amount this year because you avoided paying any (federal) taxes on it last year.
The thing is that the state government doesn’t have an upper limit on the amount you can withhold/pay in taxes during the year. You could literally write a W4 (or just send a check) to pay 100% of your salary to the state throughout the year. You wouldn’t owe a dime in federal taxes because you paid it all to the state. Then, come next April 15th, you could file a return and get a refund of your entire gross salary from the state.
Wouldn’t that be the easiest loophole ever if you didn’t have to pay any federal taxes on that refund?
(I’m not defending the IRS or our tax code, just trying to explain that it actually is self-consistent and logical to tax that refund.)
Actually, I’m just looking at Turbo Tax and it included both Federal and State on that screen.
I’m starting to think the IRS is run by Bernie Madoff.
I think this is Turbo Tax being confusing, because I’ve never heard a notion of this for federal taxes.
NOPE! I just went back and it’s me not reading it correctly. They have two entries for things paid to/from the state and I mistook it for being state and federal.
Even so… I am peeved about this.