If you itemized deductions on your Federal income tax return for 1996 or a prior year,
and received a refund of state or local taxes in 1997, you may have to include all or part
of the refund in your income on your 1997 tax return. You should receive Form 1099-G, Certain Government Payments,
advising you of the refund amount.
If any of your refund is taxable, you must file Form 1040. You
can usually use the worksheet in the Form 1040 instructions to determine the taxable
portion of your refund. However, if any of the exceptions listed in the instructions
applies to you, get Publication 525, Taxable and Nontaxable
Income. It contains further information on how to compute the taxable portion of the
refund, and special worksheets. Publications can be ordered by calling 1-800-829-3676, or
downloaded from this web site.
If you did not itemize your deductions on your federal tax return for the same year as
the refund, do not report any of the refund as income. Interest you may have received on
that refund must be reported as interest income in the year received.
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