Common questions about state and local tax refunds, unemployment (1099-G) in Lacerte

Below are solutions to frequently asked questions about state and local tax refunds and unemployment compensation.

How to Allocate the State Tax Refund on MFJ / MFS Returns

By default, Lacerte assumes that state tax refunds received are allocable to the taxpayer. The following entry in the allocation fields will only affect the MFJ/MFS Comparison Worksheet:

To allocate the state tax refund between taxpayer and spouse:

• Go to Screen 14.2, State Refunds & Unemployment Comp., etc.
• Scroll to the section titled General Information.
• In the field labeled 1 = spouse, 2 = allocate ("allocate" reserved for state refunds only), enter 2.
• Enter the percent of refund allocable to the taxpayer in the field If allocating, percentage to allocate to taxpayer (.xxxx).

MFJ/MFS Comparison State and Local Refund Tax Worksheet Override

Lacerte's automatic calculation of the taxable portion of last year's state and local income tax refund may produce inaccurate results for the taxpayer and spouse separately when the previous years figures were combined. The state and local income tax refund can be overridden both in the original joint return and in the separate split returns to achieve the desired results.

To override the state and local income tax refund:

1. Go to Screen 14.2, State Tax Refunds, Unemployment Comp. (1099-G).
2. Click on the State Refund Worksheet button.
3. Under the Refunds Taxable for 20YY Overrides section, locate the Income Tax Refunds, if itemized last year [O] field.
   • If this is a split return, enter the desired amount in the Taxpayer column.
   • If this is the original joint return, enter amounts into both columns to show the desired result on the MFJ/MFS Comparison Worksheet.

State Tax Refund Worksheet for Multiple 1099s

Taxpayer(s) receives multiple 1099s in the current tax year for state tax refunds. These refunds are for multiple past tax years. How do I enter this in Lacerte?

Solution Description:
To calculate the correct taxable state refund, multiple state tax refund worksheets must be generated. Lacerte only has the ability to generate a single worksheet for the prior year. To enter this into Lacerte, the taxable amount must be calculated manually and entered as an override. The taxable amounts for each year determined based on the tax benefit the taxpayer received in that year using the worksheet for line 10 in the Form 1040 instructions, and then summed.

Lacerte only generates one state tax refund worksheet. You can enter the worksheet from each prior year to have this figure calculated. After generating the worksheet for each prior year state refund, print them.

To generate additional worksheets in the current tax program, enter the other 1099 refund amount, and enter the amounts from the corresponding tax year in the field Amounts from 20YY Return section of the Refunds Taxable in 20YY Worksheet overriding the amounts in those fields. Print the resulting worksheet.

Continue until all 1099s have been processed.
Sum the taxable amount from the worksheets and enter the amount in screen 14, code 20, into the field Income tax refunds, if itemized last year [O]. Preparers may want to paper file to include the worksheets with the return.

Generating State Refund Worksheet With Data Input For Last Year's Taxes

Why doesn't the state refund worksheet generate or a taxable amount carry to Schedule 1, Line 1? Last year's information has been entered in Screen 14.2, State Refunds & Unemployment Comp.

Schedule 1, Line 1 uses a worksheet, located on page 86 of the Form 1040 instructions, to determine if any benefit was received on the federal return from last year's state overpayment. If Lacerte determines that none of the state refund is taxable in the current year, it will suppress the State Refund Worksheet automatically.

In addition to that, use of certain override fields in screen 14.2 can suppress automatic calculation and its related worksheets. To ensure these overrides have not been used:

1. Navigate to Screen 14.2, State Refunds & Unemployment Comp. (1099-G).
2. Click on the 1099-G located in the left navigation panel.
3. Verify the 1099-G is completely entered into the program.
4. Click on the State Refund Wksht button.
5. Verify the Income tax refunds, if itemized last year [O] field is blank.

Federal information

• State and Local Refunds Taxable Worksheet for Form 1040
• Entering unemployment compensation on individual returns
• Entering Form 1099-G in Lacerte
• How to enter agriculture payments from Form 1099-G, Box 7 in Lacerte