Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10 5/3/83; site pyuxa.UUCP Path: utzoo!watmath!clyde!floyd!whuxle!spuxll!abnjh!u1100a!pyuxn!pyuxww!pyuxa!wetcw From: wetcw@pyuxa.UUCP (T C Wheeler) Newsgroups: net.taxes Subject: Re: More on state income tax Message-ID: <587@pyuxa.UUCP> Date: Tue, 28-Feb-84 14:43:23 EST Article-I.D.: pyuxa.587 Posted: Tue Feb 28 14:43:23 1984 Date-Received: Sat, 3-Mar-84 07:44:10 EST References: <696@eisx.UUCP> Organization: Central Services Org., Piscataway N.J. Lines: 29 Maybe this will help, I don't know. us say that your total income was $1000 in 1982. Now, in order to reduce your taxes, you take a deduction for your State taxes. Let's say you paid, through payroll deductions, $200 in state taxes. Remember, you haven't figured your State tax yet. On your Fed form 1040, you take a State taxes paid deduction of $200. This reduces your total income to $800. You pay your taxes on this amount to the Feds. Now, you figure out what your State taxes are supposed to be. You find out you overpaid by $100 and will get a refund of $100. What the Feds are saying is that the $100 refund should be added to your income for this year to make up for taking too much in deductions last year. See, when you paid your taxes for 1982, you only paid on $800. The correct deduction for that year should have been $100, not $200, and taxes should have been paid on $900. The one good side of all this is that you are not penalized for figuring your taxes this way, as long as you add the refund back in next year. Now, for how to avoid this hassle in the future. Simply do your State taxes first and take the actual amount paid as the deduction on you Fed form. Thus, if you claim $100 in State taxes, and get a refund from the State, the refund is already accounted for in your total income because you did not reduce the total by the amount of the refund. If you use the actual amount of State taxes paid, there is no trying to figure out what the amount of the damn refund was if your records get lost. T. C. Wheeler