 Okay, given that, line one, taxable refunds, credits or offsets of state and local income taxes. If you received a refund, credit or offset of state or local income taxes in 2022, you may be required to report this amount. If you don't receive a Form 1099G, check with the government agency that made the payment to you. So typically you'll get a 1099G. The 1099 is the form that usually indicates that you have to record something as income. But like we said, it's only income in a certain situation if you got a benefit from it in the prior year. Okay, so your 2022 Form 1099G may have been made available to you only in an electronic format. And you will need to get instructions from the agency to retrieve this document, report any taxable refund you received even if you don't receive a Form 1099G. So like all 1099s, if you have income and you didn't get the document, you still should record it. And it could be that you just didn't get the document because it's electronically generated. It will be if it has been generated, the IRS will have it. So if you put something different on your form than what the IRS has, it's gonna cause you problems. So if you choose to apply part or all of the refund to your 2022 estimated state or local income tax, the amount applied is treated as received in 2022. So in other words, you might say, well, I didn't get a refund because I would have got a refund. Let's say I filed my 2021 tax return. I had a state tax refund, but I didn't take it because I applied it over to the estimated tax payments for the following year. Meaning we usually pay our taxes from the withholdings of the W-2 or possibly if you have a schedule C business, you make estimated payments. And I just took that refund and said keep it and that'll be part of my payments that I'm gonna be making for the year 2022. Well, in that case, that's basically the same as you got the refund from your 2021 taxes and then wrote them a check and put it back in as an estimated payment for 2022. So it's still, we're in the same spot of you might've gotten income. You have to include it if you got a tax benefit from the deduction on the federal side for 2021, which means you would have itemized the deductions and so on. So if the refund was for a tax you paid in 2021 and you deducted state and local income taxes on your 2021 schedule A, use the state and local income tax refund worksheet in these instructions to see if any of your refund is taxable. Now, that gets complicated, the worksheet again, it seems fairly straightforward. You can say, well, obviously, if they did not itemize, which many people don't, they don't have the schedule A, but rather they just took the standard deduction, then it's straightforward. They didn't get a benefit from it last year easy. So if you get a new client and they didn't itemize last year, you probably may not need to actually enter their data into the 2021 tax return to have the software roll it over because it's a pretty easy return. But if they did itemize and you got and you got this refund type of thing, the question as to did they actually get a benefit from the state taxes is not as straightforward as you would think. You would think, well, yeah, they got a benefit because they itemize, but there's still like a difference between the standard deduction and the itemized deduction. That gap to put people over to itemizing can cause you kind of issues in terms of actually determining what the benefit was. And there's a cap on the amount of state taxes which further complicates whether they got a benefit. So you need kind of somewhat of a complicated worksheet. That's why software helps and the software will help most thoroughly if you actually enter the data back into the 2021 tax return mirroring the 2021 tax return for a new client in your software and then roll over the tax return 2022. So the software can help you calculate that kind of worksheet. Okay, explanation. See itemized deduction recoveries in publication 525. You can find them the IRS website instead of using the state and local income tax refund worksheet and these instructions if any of the following applies. Number one, you received a refund in 2022 that is for a tax year other than 2021. So that kind of messes stuff up as well because now normally you would think if you got a refund in 2022, it's because you filed in 2021 but you could have weird situations where someone filed late returns for 2020 or something like that. And then you got a refund for a tax year other than the prior tax year which still puts you in a similar kind of situation in terms of did they get a benefit when they filed the 2020 tax return or whatever but obviously that muddies up the whole thing. Two, you received a refund other than an income tax refund such as a general sales tax or real estate tax refund in 2022 of an amount deducted or credit claimed in an earlier year. So note that it used to be that only the income tax was the main kind of deductible item which was kind of unfair because the states that have the income tax are gonna be like California and New York and stuff. But a lot of other states would say, hey, look, we don't wanna use an income tax. We wanna use a sales tax or some other tax system and you guys, the federal tax system is subsidizing those people using an income tax as opposed to the other tax and whatnot. So then they said that, well, if you have a sales tax then possibly you can choose to deduct either the income tax or sales tax. So now you have a system, well, they could have got a benefit from something like the sales tax or something. And if they got a refund of the sales tax that they deducted in the prior year less likely for that to happen in that situation but if it does, you can see the same kind of issue comes up. You got a benefit from it last year, you deducted it, now you got a refund. So either you need to amend last year which we don't really wanna do or you have to include it in income this year. So three, you have taxable income on your 2021 form 1040 or 1040 SR line 15 but no tax on your form 1040 or 1040 SR line 16 because of the zero tax rate on net capital gain and qualified dividends in certain situations. Four, your 2021 state and local income tax refund is more than your 2021 state and local income tax deduction minus the amount you could have deducted as your 2021 state and local general sales taxes. Five, you made your last payment of 2021 estimated state or local income tax in 2022. Six, you owned alternative minimum tax, you owed alternative minimum tax in 2022. Alternative minimum tax kind of throws everything off as well and usually is applied to a higher income individual. Seven, you couldn't use the full amount of the credits you were entitled to in 2021 because the total credits were more than the amount showing on your 2021 form 1040 or 1040 SR line 16, eight, you could be claimed as a dependent by someone else in 2021. Nine, you received a refund because of a jointly filed state or local income tax return but you aren't filing a joint 2022 form 1040 or 1040 SR with the same person. Again, a lot of these issues might be helped to be able to address by basically putting the information into the tax software for the prior year, rolling it forward, hopefully helping or getting help from the tax software so that you can apply these rules and then deconstruct them and say and kind of work backwards or in alignment with the tax software to see what has happened. We'll take a look at some examples in a following presentation.