Discussion:ProSeries and State Refunds

My question is related to the way ProSeries handles the State tax refund from the previous year. Example: The client gets a 1099G for $500 (refund received from the state). However, after the transfer by ProSeries of the previous year's state return information, the state refund appears on the 1040 line10 in the amount of $139. How could this be ? The client had itemized deductions on Schedule A of $24,000. I looked at the ProSeries 1099G worksheet, and the amount of the refund Line2 is different from what appeared on the previous year state tax refund. Also, the ProSeries "Federal Carry Forward" worksheet amount is different from the previous year's state tax refund. I have contacted the ProSeries technical support help-desk and they were of very little help. It's been very frustrating interacting with Intuit. I welcome any insight you maybe able to provide.

Restated in short form: Can I assumed that ProSeries is handling the previous years state tax refund correctly ? I have followed previous threads regarding the subject and everything seems to point to ProSeries doing things correctly, although, the IRS Federal Instruction Line10 worksheet computes something different. Any light on the subject would be appreciated.

Chet Truthseeker 14:46, 13 March 2007 (CST)

ProSeries last year (2005 and 2004). For those who are seeing a reduced state taxable amount from the 1099G (previous year), how are you handling the difference ? ps: client did not make estimated payments or AMT. I think the software is not properly handling the previous year state transfer. Any comments are welcome. I can't seem to get a straight answer from Intuit technical support. I'm very tempted to file asis, but I don't want to hear of clients receiving letters later.

Come to think of it I did have one that at first did not make sense until I followed the state refund worksheet....seems to me it was because part of the refund was ascribed to the estimated taxes paid in January 2006.

did Proseries Pro bring over this amount from the previous year? There are times, I am seeing where the 1099G worksheet state tax refund amount line is "locked" by Proseries and the amount is NOT the same as the TP prior year's state refund. However, I can link to the state refund worksheet and over-type that amount. (I rather have the software not put anything from the carry over year, especially if it's not the same amount from the TP previous state tax refund.)

If you have AMT in 2005 (which would normally make the refund not taxable) you need to enter the AMT correctly in the Tax Refund Worksheet (in the bottom section if memory serves). Even then, the worksheet doesn't handle the 4th quarter estimated tax payment paid in 2006 properly. The IRS instructions of how to make that allocation are, in my opinion, without justification or support in code or regulations. They have made the instructions be the "new" regulation.

Best bet ... know what the correct taxable refund is and don't use the Tax Refund Worksheet.

Thank you for your input concerning this matter. I just received a call from Intuit Proseries level 2 support and found out there was an ALERT issued for Illinois related to the state tax refund carryover sheet. It seems that to correct the bug, you were suppose to apply a fix issued January 19; wipe out all previous brought over files during your initial prior year transfers and this should have the 1099G and 1040 line10 correctly matching your prior year state refund. Also, if you have already started working on a client, you could go to the State Refund Worksheet and over-typed the amount in column "F". Now I can move forward since knowing that there was truly a bug in the software and a work around exist. As for the various talking points, there is a lot involved in determining how much of a state refund is taxable. Thanks again to everyone for their input.

--Truthseeker 14:32, 14 March 2007 (CST)