 But here we have the Schedule 1 and we're looking at the tax refunds, credit or offset of state and local income taxes. Now normally this is going to be seen in in the format of possibly you get a 1099 type of form that's going to say that you've got a refund from say a state tax that was overpaid in the prior year. So we're looking at 2022. So if in 2021 you had an overpayment of a state tax then you might get a type of 1099 which is usually a 1099G or something like that. It's usually an indication the 1099 form that is that you have to include something in income. But if you think about it you might say well that seems a little bit funny because it's going to be a return of an overpayment. Why would I have to record that in income? So let's just go through the general scenario to understand. I understand. I understand. That you basically got to understand that the state and local taxes are different from the federal income taxes. The federal tax system is mainly funded meaning we pay for stuff on the federal level, the primary goal being military protecting us, keeping us safe. We pay for that with an income tax primarily. And then the states are typically going to be responsible for what they need to handle on the state level and the state should be able to determine whatever tax system that they want to use. They don't necessarily need to mirror the federal government in terms of an income tax but might in play apply instead something like a sales tax or something like that or possibly they will mirror an income tax type of system. So most commonly the general scenario is that you have an income tax type of system on the state level which is mirroring what is happening on the federal level. Something like happens similar in California which has an income tax type of system. Now for some reason they said that the taxes on the state level is something that's deductible possibly on the Schedule A when you have the itemized deductions for the federal income taxes which is a little bit odd and again this is one of those things that if you were to start the tax code from scratch you probably wouldn't want to do that because that puts a lot of influence in terms of how the states are going to be taxed. Tax purposes. Because they're going to get a benefit in taxing in certain ways if you give them a deduction on the federal side for taxing and so on and so forth the problem is once the tax system is in place it's hard to it's hard to pull the deductions out because because people have planned on them and so on at this point in time so there's been debate about about that system in and of itself should we be able to deduct state taxes on the federal side of things how much should we be able to deduct should there be a cap on it and they kind of limited the amount of deduction that you can take in a few years ago and they also increased the level of the standard deduction which means less people will be itemizing so the general rule would be well if you've got a tax benefit from the prior year tax return on the state side and you got to deduct the state taxes that you paid and you deducted the amount that you actually paid in state taxes then you got a benefit of a deduction and if they then give you a refund because you overpaid the state taxes that means you got an over deduction you got to deduct more in 2021 than you otherwise would have been able to deduct because you they gave you the money back how are we going to deal with that well you could go back and amend the federal income tax return to amend the itemized deductions so that it reflects the amount that's that's not going to be refunded back or we could just say if you get a refund and you got a benefit from it you have to include it in income in 2022 so that's the that's the general scenario so how does that play out then in practice the general rule is going to be if you get a form that's saying that you got a refund from the state of 1099g or something like that then if the person did not itemize last year and typically people aren't going to itemize unless they have a home because the mortgage interest and real estate as we'll talk about later are the things that push people over to itemizing if they did not itemize last year then they likely didn't they didn't get any tax benefit from the state taxes and therefore you don't have to include it in income however if they did itemize last year that's when you may have to include it in income if they got a benefit from from the state taxes which gets complicated because then you've got to think about did they really get a benefit if they itemize because there's a difference between the standardized deduction and the itemized deductions and there's also a cap in terms of how much state taxes are deductible so then you have to get into the weeds and say well did they actually get a benefit even though they can itemize from the state taxes and how much then do I have to include in the current year the best tools for that are typically software to help with help with those calculations and if you have a situation where you have more complex returns a return for example has itemized deductions then oftentimes it's beneficial if it's a new client not just to start inputting from 2022 but rather recreate the tax return from 2021 in your software and then roll it over from the software so that these kind of things those rollover items will the software to help to populate it