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The amount that appears on Line 1 of Schedule 1 (Form 1040) Additional Income and Adjustments to Income is entered by the taxpayer from the information on a Form 1099-G Certain Government Payments or similar statement. There are situations where taxpayers must go to IRS Publication 525 Taxable and Nontaxable Income and manually calculate their taxable state refund. While TaxAct does not support the automatic calculation for these types of situations, the program does provide instructions on the Q&A screen of situations not supported and provides a workaround for entering the correct taxable amount.

To view the Q&A screen describing the situations where a taxpayer may need to manually calculate the taxable state income tax refund amount:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click State Income Tax Refund in the Federal Quick Q&A Topics menu.
  3. Click the info icon next to "Manually calculate taxable state and local refund."

The text on this pop-up states:

Manually Calculate Taxable State or Local Refund

There are situations when a taxpayer may need to manually calculate the taxable state or local income tax refund using IRS Publication 525. These include: the refund is for a tax year other than 2019, you made your last payment of 2019 state or local estimated tax in 2020, you could not deduct all your tax credits for 2019 or you could be claimed as a dependent by someone else in 2019. If you are required to use Publication 525 then you will need to manually calculate the taxable portion. Enter the correct taxable amount on the State or Local Income Tax Refund Document and enter the applicable year as the tax year of the refund. For these situations, click "Review" to enter your Form 1099-G and enter the manually calculated taxable portion of your refund. This amount will then transfer directly to Form 1040.

To enter the manually calculated amount in the TaxAct program:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click State Income Tax Refund in the Federal Quick Q&A Topics menu.
  3. Click + Add Form 1099-G State Refund Document to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.
  5. On the screen titled Enter the state or local income tax refund information, enter the Taxpayer's/Spouse's state or local income tax refund amount, enter the applicable Tax year of income tax refund, select the appropriate state from the Payer's state drop-down, then click Continue.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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