Newby questions

[Victor Roberts]

On Sat, 2003-10-11 at 00:30, Linas Vepstas wrote:
> On Mon, Sep 29, 2003 at 01:14:59AM -0400, Derek Atkins was heard to remark:
> > 
> > > 2.  Where would it be appropriate to put an Income Tax refund?  It
> > > really isn't an Income.  Should it be a credit to Federal Tax?  Would
> > > this mess up the tax calculations for the year?
> > 
> > Ask your accountant?
> 
> Hopefully there are some accountants hanging out on these mailing lists 
> that might be willing to answer the occasional question such as this.

Federal or State income tax refund? Did you get a chect or credit? 
Neither is "income" but they have different tax consequences. A Federal
Income tax refund is not income and has no tax consequences. If you want
to show it as a credit against Federal Income Taxes it must be shown as
a credit against taxes paid for the same year as the refund. That is, if
this is a refund for TY2002 Federal Income Taxes then you can show it as
a credit against your 2002 federal Income Taxes, but _not_ as a credit
against your 2003 Federal Income Taxes, unless the IRS did credit your
refund to your 2003 Income Taxes.

If this is a State Income Tax refund it is also NOT income but does have
Federal tax consequences. You will owe Federal Income Taxes for TY2003
for that part of your State income tax refund that you deduced on your
TY2002 Federal taxes. There is an IRS worksheet associated with Form
1040 to help you figure out how much of the refund is taxable.
Therefore, State Income Tax refunds must be placed in a separate account
so you can enter them properly on your TY2003 Federal Return. 

-- 
Vic Roberts