NY State Inflation Refund Checks and Federal Tax Reporting

[j1m]

NY state came out and said they aren't taxing the checks, but on the Federal Side there's a lot of different information. You can find a 1099-g on the states website after searching for the client, so it's being reported to the IRS. I have read if you didn't itemize in 2023 don't worry about it, but I've also read this wasn't a property tax rebate so it's different. 

What triggered my thought here is a news article saying this was the hang-up with Proseries not being able to file NY returns until today. People using turbo tax had everything rejected as well until the state fixed the programming flaw on their end last night.

When I enter the info onto the 1099-G form, it says for refunds for 2023 or prior, which is what this is based from, to enter it on the State Refund Worksheet. It seems accurate, adding the total on schedule 1, and has no impact on the State side.

Anyone else have a different opinion here on how to address this?

[shf1957]

If the party itemized and took benefit ot the NYS Sales tax in their section for taxes on the schedule A for the year of 2023.,..  then go on 2025 and on line 8 click on it  then go to line 8 on that one too... then click on 8z twice , it will bring you to a line #12.. and it will be in yellow   type in there "NYS Inflation refund and put the amounts in the proper columns... "   then it's done reporting it to the federal

[fredr]

Is it taxable if taxpayer did not itemize in 2023

[ez10977]

Hi

This is what I posted on ttlc.intuit.com

NYS issued 1099-G forms to individuals who received the 2025 rebate check, but the year indicated on the 1099-G is 2025.

To clarify, generally, if you receive a 2025 1099-G from any state with a 2024 year on it, this implies it is taxable if you itemized your deductions in 2024. This is because you would have gained a federal tax benefit in 2024 from the taxes paid to that particular state, and therefore, if refunded, you must recapture that deduction at the IRS level and report it as income in 2025. The same principle applies if you received a 2025 1099-G with a 2023 year on it; its taxability depends on whether you itemized your deductions in 2023.

However, this situation is different. The rebate check was not a refund for taxes paid in 2023; instead, it was a general refund distributed to all families meeting specific income limitations. Therefore, what NYS is indicating with this 1099-G form is that if you itemize your deductions in 2025—for instance, claiming $10,000 in NYS income taxes paid and $12,000 n property taxes paid—you will need to report this rebate check as other income to the IRS. Failure to do so would result in a duplicate gain for you.

Consequently, there is no need to review your 2023 tax records to determine if you itemized. ​This rebate is exclusively taxable for individuals who itemize their deductions in 2025.​

[BobKamman]

The federal government taxes income, not pieces of paper.  New York used the wrong form here; it should have been a 1099-MISC.  Their mistake doesn't justify your omission.  They payment was made even to people who owed no tax and paid no tax (for example, they were out of state all of 2023, but still considered a resident), so whether they itemized in 2023, or 2024, or 2025 is irrelevant.  

[ez10977]

@bob 

I agree with that and that's exactly what I wrote before on ttlc.intuit.com that's a welfare payment based on someone's AGI, nothing to do with taxes and it's should be exempt according to the IRS, but being that NYS did issue a 1099-G the best way is to Include it in the Income or to reduce it from taxes paid on schedule A for someone who itemizes deductions in 2025.

https://ttlc.intuit.com/community/retirement/discussion/taxability-of-nys-inflation-relief-check/00/...

[BobKamman]

Has IRS actually expressed a position on this?  In any case, the best way is the right way.  That means not screwing your clients out of taxes they don't owe.  A $400 1099 is not going to trigger an IRS notice.  If there is actual omitted income from other sources that generate a notice anyway, that's the client's fault.