Taxable refunds, credits, or offsets of local U 2025

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The form used to file local taxes for the locality in which the business operates. Local Return Extended Definition. In some states, there is an additional local tax.
If you received a refund of state or local income taxes from last years tax return, you may receive a Form 1099-G reporting this refund as income. If you itemized deductions on your federal return in the same year that you received the state or local refund, the refund may be considered taxable income.
The most common uses of the 1099-G is to report unemployment compensation, as well as any state or local income tax refunds you received that year. How can you determine if you have fallen victim to a fraudulent unemployment claim?
You might receive Form 1099-G reporting a state or local income tax refund. If so, that doesnt mean your refund is automatically taxable. If you claimed the state or local income taxes you paid as an itemized deduction on last years return, usually your state or local refund is taxable.
As of 2/10/2023 the IRS has changed their guidance on these state tax refunds including the California Middle Class Tax Refund. You can review that IRS notice here. This income is no longer taxable and you will not report the amount on your federal return. Please keep the 1099-MISC for your records only.
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Taxable Refunds, Credits or Offsets of State or Local Income Taxes. If you receive a refund of (or credit for) state or local income taxes in a year after the year in which you paid them, you may have to include the refund in income in the year you receive it.
Box 2 of Form 1099-G shows the state or local income tax refunds, offsets, or credits you received, but these amounts typically only need to be reported if you took a federal deduction for paying those taxes in a prior year and that deduction actually reduced your federal taxes.

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